LANKEM CEYLON PLCContents Financial Highlights 05 Chairman’s Message 06 Board of Directors 08...

LANKEM CEYLON PLC

Our Business Areas

Agri-Inputs

Paints

Chemicals

Consumer

Pest Control

Leisure

Packaging

ContentsFinancial Highlights 05

Chairman’s Message 06

Board of Directors 08

Sustainability Report 10

Annual Report of the Board of Directors 11

Corporate Governance 15

Risk Management 18

Remuneration Committee Report 20

Related Party Transactions Review Committee Report 21

Audit Committee Report 22

FINANCIAL INFORMATION

Independent Auditor’s Report 24

Statement of Profit or Loss and Other Comprehensive Income 27

Statement of Financial Position 28

Statement of Changes in Equity 29

Cash Flow Statement 30

Notes to the Financial Statements 31

Ten Year Summary 108

Share Information 109

Notice of Meeting 111

Notes 112

Form of Proxy 115

Corporate Information Inner Back Cover

Lankem Ceylon PLC | Annual Report 2018/194

Our Business AreasOur Business Areas are Agri-Inputs, Paints, Chemicals, Consumer Products, Pest Control, Leisure and Packaging.

VisionTo be the front runner in the chemical industry of Sri Lanka.

MissionOur mission as a manufacturer and formulator of chemical products is to expand our business through value addition and quality assurance with a commitment to society to continuously improve management and performance in the areas of health, safety and the environment.

Lankem Ceylon PLC | Annual Report 2018/19 5

Financial Highlights

Performance Highlights

Revenue

Rs.17,659 MillionTotal Assets

Rs.18,573 Million

Total Equity

Rs.5,022 MillionNet Assets Per Share

Rs.65.84

2014/15 2015/16 2016/17 2017/18 2018/19

Revenue – GroupRevenue – Group(Rs. Mn)

0

5,000

10,000

15,000

20,000

2014/15 2015/16 2016/17 2017/18 2018/19

Total Equity – GroupTotal Equity – Group(Rs. Mn)

0

1,000

2,000

3,000

4,000

5,000

6,000

2014/15 2015/16 2016/17 2017/18 2018/19

Total Assets – GroupTotal Assets – Group(Rs. Mn)

0

5,000

10,000

15,000

20,000

Net Assets Per Share – GroupNet Assets Per Share – Group(Rs.)

2014/15 2015/16 2016/17 2017/18 2018/190

30

60

90

120

150


Chairman’s Message

On behalf of the Board of Directors, I take pleasure in welcoming you to the 54th Annual General Meeting of Lankem Ceylon PLC and presenting you with the Annual Report and the Audited Financial Statements of your Company for the year ended 31st March 2019.

The year 2018 was undoubtedly a challenging year. Global economic, financial and geopolitical developments as well as several domestic challenges impacted the overall macroeconomic stability which saw the Country’s economic growth decline to 3.2% from 3.4% reported during the previous year. The GDP growth in the current year was largely supported by service activities which recorded a growth of 4.7% coupled with 4.8% growth in the agriculture sector indicating a recovery as the sector had been underperforming during the two previous years. The Country’s construction sector experienced a decline in growth while the industry sector remained stagnant.

The Group’s performance during the year was in an environment which posed significant challenges such as steep devaluation of the local currency by 13% year on year following the Government’s decision in September 2018 to permit greater flexibility in the determination of the exchange rate. Further, political uncertainty, together with rise in interest rates unduly burdened the Sri Lankan corporate sector in respect of borrowings needed for regular commercial activities.

Despite such unprecedented challenges taking place all around us the Lankem Group achieved a turnover of Rs. 17.7 Billion, a drop of 4% compared to Rs. 18.5 Billion achieved during the previous financial year. The Company achieved a turnover of Rs. 3.2 Billion for the year compared to the turnover of Rs. 4.2 Billion recorded for the previous year. At Group level, the net loss stood at Rs.884 Million during the current financial year.

The Agro Chemicals cluster which is one of the primary contributors to the Group’s top line witnessed yet another challenging year driven by many negative externalities. Although poor weather patterns continued during the first half of the year and further regulatory restrictions on Agro chemicals, the Company’s Agricultural Sector was able to conclude the year by reporting a modest profit. However going forward, we seek to take measured steps to sustain our growth objectives and have invested in many strategic initiatives for the coming year such as introducing a new weedicide and an insecticide for the farming community to improve their productivity. These strategies will drive our business model to add further value to our product portfolios in the near term.

A new strategic plan was also formulated and executed in the 3rd quarter of the year under review segregating the operations of the three core business units of the Company. Consequent to this, both Paints and Industrial Divisions embarked on a stringent cost reduction drive to streamline operational expenses against the previous year. We envisage that the culmination of these strategies will help establish long-term sustained profitability in the business sectors we operate amidst the impact of the degrowth of 2.1% witnessed in the Construction sector during the year under review.

The Company’s focus would be to capitalize on Paints and Industrial Chemicals as the core businesses, which will guide the Company towards rapid growth in the years ahead. Therefore, in this quest, the Paints and Industrial Chemical divisions will be on a market stabilization drive in the coming year by rationalizing their Customer and Product portfolios to prioritize on customers and products that would yield the highest margins and returns.

The Company’s finance cost reported a drop, a modest 2% compared to the previous year as the term loans were restructured with a lower interest rate coupled with a step-up capital repayment program. Thus, term loan interest reduced by 10% in comparison with the previous year. However, due to excessive fluctuation of the exchange rate, a higher exchange loss was recorded compared to the exchange gain reported during the previous year.

C.W. Mackie PLC reported yet another year with satisfactory performance in both revenue and profitability. Leisure sector of the Group also contributed positively in terms of turnover and profitability. However, the packaging sector could not contribute as expected due to high fluctuation of exchange rate and write off of old inventory resulting in negative contribution to the Group.

I believe 2019 will be a year of mixed fortunes for Sri Lanka given headwinds from weakening global growth and domestic political uncertainties. In this context, the year ahead will be a challenging year and the Company thus needs to take a firm grasp of the opportunities that are extended through the rapid development plans and the Government’s investment initiatives planned to develop the economy. As we move forward, I am convinced these initiatives will turn around the performance of the Company and will support the Company to achieve sustained profitability.


Mr. Alagarajah Rajaratnam joined the Board in 1990, served as the Chairman of the Company from the year 2003 to September 2017 and resigned from the Board on 31st March 2019. I take this opportunity to convey our appreciation for steering the Company during difficult times and for his invaluable service and contribution to Lankem and wish him well for the future.

On behalf of the Board, I would like to thank our valued shareholders for their support and loyalty to the Company. I would also like to thank all our employees for their hard work and commitment in helping to drive the Company through the many changes during this challenging year, to ensure our long-term success. I also extend my sincere thanks to the Board of Directors for their advice and support.

I also wish to thank our numerous stakeholders for their long standing support and for their continued trust and confidence in the Company.

S. D. R. ArudpragasamChairman

28th August 2019


Board of Directors

S. D. R. Arudpragasam [FCMA (UK)]

ChairmanMr. S. D. R. Arudpragasam joined the Board in 1989, was appointed Deputy Chairman in 1990 and as the Chairman on 1st October 2017. He serves as Chairman of several subsidiaries of The Colombo Fort Land & Building PLC including Chairman/ Managing Director of E.B. Creasy & Company PLC. He also holds the position of Deputy Chairman of The Colombo Fort Land & Building PLC in addition to serving on the Boards of other Companies within the CFLB Group.

A. Hettiarachchy [C.Eng, MIEE, MIProdE, MIChemE]

Deputy Chairman Mr. A. Hettiarachchy was appointed to the Board as an Independent Non-Executive Director in April 2010 and was appointed Deputy Chairman on 1st October 2017. He is a Chartered Engineer and is the Director/ Chief of Research and Engineering Systems - Sri Lanka Institute of Nanotechnology. He is Chairman of the Board of ISL Services Limited, Chairman of LOLC Advanced Technologies (Private) Limited and Board Member of Central Industries PLC and serves as the Chairman of its Audit Committee. He has served on the Boards of Richard Pieris Arpico Finance Ltd, Hayleys PLC and functioned as Managing Director on the Boards of Haycarb PLC, Recogen Limited and Puritas Limited and also served on several other subsidiaries of Haycarb PLC and Hayleys PLC both in Sri Lanka and Overseas.

He was also a Board Member of the National Science Foundation, Coconut Research Institute, Member of the National Nano Committee and a member of several advisory Boards of the NSF. Mr. Hettiarachchy possess expertise in the fields of Process Design, Construction and Commissioning; Instrumentation and Control-Design, Installation and Commissioning; Mechanical Engineering, Thermal and Electrical Energy - Generation and Storage and Nano Technology.

D. L. Vitharana [MNI (Lond), MBA, M.Sc. (UK)]

Managing DirectorMr. D. L. Vitharana was appointed to the Board in 2005. He joined Lankem Ceylon PLC in 1997 and has headed the Lankem Agro cluster since 1999. Having served as Chief Operating Officer of Lankem Ceylon PLC since April 2009, was appointed as Managing Director from January 2017. Mr. Vitharana also serves on the Boards of several subsidiaries of the Lankem Group.

Anushman Rajaratnam [B.Sc (Hons.), CPA, MBA]

DirectorMr. Anushman Rajaratnam prior to joining Lankem Ceylon PLC had spent several years working overseas as a Consultant for a leading Accountancy Firm. He was appointed to the Board as Deputy Managing Director in the year 2005 and was appointed Managing Director in April 2009. He relinquished his position as Managing Director of Lankem Ceylon PLC in December 2016 and effective January 2017 serves as Group Managing Director of The Colombo Fort Land & Building PLC in addition to serving on the Boards of several subsidiaries of the CFLB Group.

R. N. Bopearatchy [B.Sc. (Cey), Dip. BM., MBA (Univ. of Col)]

DirectorMr. R. N. Bopearatchy was appointed to the Board in 1996. He has considerable expertise in product development, manufacturing and marketing of pesticides, pharmaceuticals and consumer products. Soon after graduation he was employed in research in the Plant Pathology Division of the Tea Research Institute and subsequently joined Chemical Industries Colombo Ltd., and was appointed to its Board. He also served on the Boards of Crop Management Services (Pvt) Ltd., the managing agents for Mathurata Plantations Ltd., CIC Fertilizers Ltd. and Cisco Speciality Packaging (Pvt) Ltd. He has held office as the Chairman of the Pesticide Association of Sri Lanka, the Toxicological Society of Sri Lanka and the International Mosquito Spiral Manufacturers Association (IMSMA). Mr. R. N. Bopearatchy currently holds several other directorships within The Colombo Fort Land & Building Group.

K. P. David [FCMA (UK), FCMA, FIPFM, CGMA]

DirectorMr. K. P. David, having commenced his career in the Banking sector, joined E. B. Creasy & Company PLC as Group Accountant in 1993. He proceeded to be Head of Finance/CFO of Lankem Ceylon PLC and its subsidiaries until February 2017.He was appointed to the Board of Lankem Ceylon PLC in 2007 and now functions as Managing Director of its Packaging Sector, in addition to holding several other directorships within the Lankem Group.


R. T. Weerasinghe [BBA – USA]

DirectorMr. R. T. Weerasinghe was appointed to the Board in April 2009. He joined Darley Butler & Company Ltd, in the year 1994 as a Trainee Product Manager and was seconded to Lankem Ceylon PLC as the Marketing Manager of the Consumer Division in 1998. He was promoted as General Manager of the Consumer Division in 2005 and was also appointed as General Manager of the Paints Division. In addition he was appointed as the Head of the Industrial Chemicals Division in 2009. Mr. Weerasinghe possesses expertise in the fields of Marketing and Management. Mr. Weerasinghe also serves on the Boards of certain subsidiaries of Lankem Ceylon PLC.

A. C. S. Jayaranjan [FCA, FCMA (UK), CGMA]

DirectorMr. A. C. S. Jayaranjan was appointed to the Board as an Independent Non-Executive Director in June 2010. He started his career as a professional at KPMG. Thereafter he has been working for over forty years in the commercial and industrial sectors at senior managerial level. He was the Chief Accountant at James Finlay & Company PLC and Deputy Chief Executive Officer/Executive Director Shaw Wallace & Hedges PLC.

Mr. Jayaranjan then joined as the Group Finance Director of Pership Group and later joined John Keells Holdings PLC, as Senior Vice President, Head of Learning & Development. His experience covers diverse areas in commerce and industry. Mr. Jayaranjan is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, and a Fellow Member of the Chartered Institute of Management Accountants (UK). He is a lecturer for the MBA program at the Colombo campus of London Metropolitan University.

Mr. R. Seevaratnam [B.Sc. (Lond.), FCA (Eng.and Wales) FCA (ICASL)]

DirectorMr. R. Seevaratnam was appointed to the Board as an Independent Non Executive Director in April 2014. He is a fellow member of The Institute of Chartered Accountants of England and Wales and of Sri Lanka and holder of a General Science Degree from the University of London. He was a former senior partner of KPMG. Mr. Seevaratnam is a Director of several listed and unlisted companies.

Mr. P.M.A. Sirimane [FCA, MBA]

DirectorMr. P.M.A. Sirimane was appointed to the Board on 1st September 2017. He joined the E B Creasy Group in October, 2009 and was appointed to the Board of E.B. Creasy & Company PLC in November 2009. Amongst other senior positions he has functioned as Managing Director/CEO of Mercantile Leasing Limited, Group Finance Director of United Tractor & Equipment Limited, Chief Financial Officer, Sri Lanka Telecom Limited and Director SLT Hong Kong Limited. He has served as a Member of several Committees of the Institute of Chartered Accountants of Sri Lanka and was an ex-officio member of the International Leasing Association. Mr. Sirimane also serves on the Boards of some of the subsidiaries of the E B Creasy Group and holds several other Directorships including that of The Colombo Fort Land & Building PLC where he now serves as Group Finance Director.

Mr. M.N.K. Jayamanne [MBA(Col), BSc(Agric)Hons, CIM(UK), ACS(Aus)]

DirectorMr. M.N.K. Jayamanne was appointed to the Board on 1st April 2018. He holds a Masters Degree in Business Administration from the University of Colombo and a Bachelor of Science Degree in Agriculture from the University of Peradeniya. He has more than 22 years of experience in the Agro Chemicals business covering all functional areas including Sales, Marketing, Research and Production.


As Our approach throughout the Company’s history, we have strived to support the communities we serve. We take pride in the special relationship we have built with our employees, consumers, shareholders and all stakeholders, in every corner of the island and we work every day to maintain that relationship and ensure that we provide them with the products and information they need to stay abreast with new and emerging trends. We aim to achieve this objective by leveraging on eco-friendly operations that minimise wastage and optimise natural resources.

We are dedicated to setting higher benchmarks in the industry that reflect global best practices in all aspects of our operations. Green leadership has to be inherent; it is not a philosophy, strategy or thought process that can be implemented on the surface but one that must form the axis of an entity’s accountable responsible conscience. This commitment has led the Company to inculcate a green and corporate responsibility framework, a framework that cascades its green consciousness and responsibility towards society, with the top management taking leadership in ensuring that the impact on the environment through business is minimised. There is also a concerted effort to continually introduce best practices and raise the bar in our actions. This approach is the backbone of Lankem, with each team member taking ownership for their actions and displaying immense responsibility and accountability. The results are now tangible, arbitrated by the accolades gained for green practices and CSR projects; however, our efforts are not limited to awards and titles. We are not solely focused on short term results; instead we take a futuristic approach. We believe that creating societal and environmental value is integral to sustaining long-term shareholder value.

Our People Our people make us different—energetic about supporting and challenging all our stakeholders in equal measure. We’re passionate about making a measurable impact in all we do. Our unique culture and approach deliver enduring results, true to each client’s specific situation. We will always do the right thing by our clients, our people and our communities. We have always maintained that sustainable leadership comes from within and has to be driven by spearheads who are committed to being sustainable, leaving no stone unturned to continue reducing its carbon footprint. Lankem possesses a highly talented and diverse workforce within a safe and healthy workplace. We upgrade and upkeep safety standards across all divisions. A green culture can only be fostered through persistent practice, knowledge sharing and team building. Events in our ‘Sustainable Calendar’ include the annual painting of religious places of worship – Dalada Maligawa, Madhu Church, hospitals and medical institutes, the donation of school supplies to needy children and medical awareness workshops.

Recycling for a Sustainable Tomorrow The Company also placed great emphasis on the environmental aspect considering its growing importance amidst clear evidence that this country’s weather patterns are also significantly affected by the effects of global warming. Our efforts in this regard were of two types, i.e. activities carried out to conserve valuable resources in our day to day operations and activities performed to improve awareness on the need for protecting the environment beyond the confines of our offices.

The Group’s business activities involve high consumption of both water and energy. These two aspects of our operations have become the focus of our sustainability efforts. As a company we understand that both are non-renewable resources and that as a large consumer of both these valuable sources, we need to minimise usage and practice sustainable best practices to recycle and recover both water and energy wherever possible.

Towards a Sustainable Future Our environmental consciousness is ingrained into the conduct of our business. It is the ethos of Lankem. We strive to make an impact on the ecological canvas and ascertain our corporate stewardship as a ‘sustainable’ company.

Sustainability Report


Annual Report of the Board of DirectorsThe Board of Directors of Lankem Ceylon PLC present their Report on the affairs of the Company together with the Audited Financial Statements for the year ended 31st March 2019. The details set out herein provide the pertinent information required by the Companies Act No. 07 of 2007, and the Colombo Stock Exchange Listing Rules and are guided by recommended best practices.

GeneralThe Company was re-registered on 18th March 2008 as required under the Companies Act No. 07 of 2007.

Principal Activities, Business and Future ProspectsThe principal activities of the Company together with those of its subsidiary companies have been described along with the Corporate Information in this Annual Report. A review of the Company’s business and its performance during the year with comments on financial results and future prospects is contained in the Chairman’s Message of this Annual Report. This report together with the Financial Statements reflect the state of affairs of the Company. The Directors, to the best of their knowledge and belief, confirm that the Company has not engaged in any activities that contravene laws and regulations.

Financial StatementsThe Financial Statements of the Group are given on pages 27 to 107.

Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on pages 24 to 26.

Accounting PoliciesThe Accounting Policies adopted in the preparation of the Financial Statements are given on pages 31 to 55.

Interest Register

Directors’ Interest in TransactionsThe Directors have made general disclosures as provided for in Section 192 (2) of the Companies Act No. 07 of 2007. Arising from this, details of contracts in which they have an interest are disclosed in Note 29 to the Financial Statements on pages 91 to 99.

Directors’ Remuneration Directors’ remuneration in respect of the Group for the financial year 2018/19 is Rs. 129.54 Million (2017/18 – Rs. 142.97 Million) and in respect of the Company for the financial year 2018/19 is Rs. 93.25 Million (2017/18 - Rs. 99.92) Million.

Directors’ Interest in SharesThe Directors of the Company who have an interest in the shares of the Company have disclosed their shareholdings and any acquisitions/disposals to the Board in compliance with Section 200 of the Companies Act No. 07 of 2007. Details pertaining to Directors’ direct Shareholdings are as follows:

No. of SharesAs at

31.03.2019

No. of SharesAs at

31.03.2018

Mr. S. D. R. Arudpragasam 25,000 25,000

Mr. A. Hettiarachchy - -

Mr. D. L. Vitharana - -

Mr. A. Rajaratnam (Resigned w.e.f. 31.03.2019) - -

Mr. Anushman Rajaratnam 1,500 1,500

Mr. R.N. Bopearatchy - -

Mr. K. P. David 8,150 8,150

Mr. R. T. Weerasinghe 7,000 7,000

Mr. A. C. S. Jayaranjan - -

Mr. R. Seevaratnam - -

Mr. P.M.A. Sirimane - -

Mr. M.N.K. Jayamanne (Appointed w.e.f.1st April 2018) - N/A

Mr. M.M.A.R.P. Goonetileke (Resigned w.e.f. 30th June 2018.) - -


Annual Report of the Board of Directors

Corporate DonationsDonations made by the Group amounted to Rs. 2,335,000/-, during the year under review. (2017/2018 - Rs. 1,035,000/-).

DirectorateThe names of the Directors who held office during the financial year are given below. Brief profiles of the Directors currently in office appear on pages 8 and 9.

Mr. S. D. R. Arudpragasam Chairman

Mr. A. Hettiarachchy Deputy Chairman

Mr. D. L. Vitharana Managing Director

Mr. A. Rajaratnam Director (Resigned w.e.f. 31.03.2019)

Mr. Anushman Rajaratnam Director

Mr. R. N. Bopearatchy Director

Mr. K. P. David Director

Mr. R. T. Weerasinghe Director

Mr. A. C. S. Jayaranjan Director

Mr. R. Seevaratnam Director

Mr. P.M.A. Sirimane Director

Mr. M.N.K. Jayamanne Director (Appointed w.e.f. 1st April 2018)

Mr. M.M.A.R.P. Goonetileke Director (Resigned w.e.f. 30th June 2018)

In terms of Articles 84 and 85 of the Articles of Association, Mr. A.C.S. Jayaranjan retires by rotation and being eligible offers himself for re-election.

Mr. M.N.K. Jayamanne was appointed an Executive Director of the Company with effect from 1st April 2018.

Mr. M.M.A.R.P. Goonetileke resigned from the Board of Directors with effect from 30th June 2018.

Mr. A. Rajaratnam resigned from the Board of Directors with effect from 31st March 2019.

Mr. Amrit Rajaratnam ceased to be Alternate Director to Mr. A. Rajaratnam with effect from 31st March 2019.

Mr. R. N. Bopearatchy, Director, being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Mr. R. Seevaratnam, Director, being over seventy years of age retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

Mr. A. Hettiarachchy who has attained the age of seventy years retires and offers himself for reappointment under and by virtue of the Special Notice received from a shareholder of the Company which is referred to in the Notice of Meeting.

AuditorsThe Financial Statements of the Company for the year have been audited by Messrs KPMG Chartered Accountants, the retiring Auditors who have expressed their willingness to continue as Auditors of the Company and are recommended for reappointment. A resolution to reappoint them and to authorize the Directors to determine their remuneration will be proposed at the Annual General Meeting.

The Auditors, Messrs KPMG Chartered Accountants were paid Rs. 10.55 Million during the year under review (2017/18 – Rs.9.75 Million) as audit fees and fees for audit related services by the Group. In addition, they were paid Rs. 2.05 Million (2017/18 – Rs. 1.05 Million) by the Group for non-audit related work, which consisted mainly of tax related work. In addition to the above, Group companies are engaged with other audit firms. Audit fees in respect of these firms amounted to Rs. 5.6 Million during the year under review (2017/18 – Rs. 2.89 Million). As far as the Directors are aware, the Auditors do not have any relationship (other than that of an Auditor) with the Company. The Auditors do not have any interest in the Company.


RevenueThe revenue of the Group for the year was Rs. 17.66 Million (2017/18 - Rs. 18.47 Million).

ResultsThe Group made a loss before Tax of Rs. 1,049.96 Million against a loss of Rs. 349.16 Million in the previous year. The detailed results are given in the Statement of Comprehensive Income on page 27.

InvestmentsInvestments made by the Group are given in Note 17 to the Financial Statements on pages 69 to 74.

Property, Plant & EquipmentDuring 2018/19 the Group invested Rs. 286.19 Million in Property, Plant & Equipment (2017/18 - 399.01 Million). Further, your Directors are of the opinion that the net amounts of Property, Plant & Equipment other than freehold land, appearing in the Statement of Financial Position are not greater than their market value as at 31st March 2019.Market value of the freehold land as at 31st March 2019 is disclosed in Note 12.4 to the Financial Statements on page 65.

Stated CapitalThe stated capital of the Company as at 31st March 2019 was Rs. 930,346,000/- and is represented by 33,853,200 issued and fully paid Ordinary Shares.

ReservesThe total Group Reserves as at 31st March 2019 comprised Other Capital Reserves of Rs. 4.83 Million, Available for sales Reserves of (Rs. 4.71 Million) and Retained Reserves of Rs. 380.82 Million, whereas the total Group Reserves as at 31st March 2018 comprised Other Capital Reserves of Rs. 4.83 Million, Available for sales Reserves of Rs. 12.73 Million and Retained Reserves of Rs. 608.91 Million. The movements are shown in the Statement of Changes in Equity in the Financial Statements.

TaxationThe Group’s liability to taxation has been computed in accordance with the provisions of the Inland Revenue Act No. 24 of 2017, and subsequent amendments thereto.

Income tax and other taxes paid and liable by the Group are disclosed in Note 10 to the financial statements on pages 59 to 62.

Related Party TransactionsDuring the financial year there were no recurrent related party transactions which exceeded the respective thresholds mentioned in Section 9 of the Colombo Stock Exchange Listing Rules. However non recurrent related party transactions which exceeded the respective disclosure thresholds are duly set out in Note 29.5 on page 96. The Company has complied with the requirements of the Listing Rules on Related Party Transactions.

The Related Party Transactions presented in the financial statements are disclosed in Note 29 from page 91 to 99.

Share InformationInformation relating to earnings, dividend, net assets, market value per share and share trading is given on pages 109 and 110.

Events Occurring after the Reporting PeriodEvents occurring after the Reporting Period that would require adjustments to or disclosures are disclosed in Note 34 on page 106.

Capital Commitments and Contingent LiabilitiesCapital commitments and contingent liabilities as at the date of the Statement of Financial Position are disclosed in Note 31 and 32 on pages 105 and 106.


Annual Report of the Board of Directors

Employment PolicyThe Company’s recruitment and employment policy is non-discriminatory. The occupational health and safety standards receive substantial attention. Appraisals of individual employees are carried out in order to evaluate their performance and realize their potential. This process benefits the Company and the employees.

ShareholdersIt is the Company’s policy to endeavor to ensure equitable treatment to its shareholders.

Statutory PaymentsThe Directors, to the best of their knowledge and belief, are satisfied that all statutory payments of the Company due in relation to employees and the Government have been made promptly and are up to date.

Environmental ProtectionThe Company’s business activities can have direct and indirect effects on the environment. It is the Company’s policy to minimize any adverse effect its activities have on the environment and to promote co-operation and compliance with the relevant authorities and regulations. The Directors confirm that the Company has not undertaken any activities which have caused or are likely to cause detriment to the environment.

Internal ControlThe Directors acknowledge their responsibility for the Company’s system of internal control. The system is designed to give assurance regarding the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information generated. However, any system can ensure only reasonable and not absolute assurance that errors and irregularities are either prevented or detected within a reasonable period of time.

The Board is satisfied with the effectiveness of the system of internal control for the period up to the date of signing these Financial Statements.

Going ConcernThe Directors, after making necessary inquiries and reviews including reviews of the Company’s budget for the subsequent year, capital expenditure requirements, future prospects and risks, cash flows and borrowing facilities, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, the going concern basis has been adopted in the preparation of the Financial Statements.

For and on behalf of the Board

Mr. S. D. R. Arudpragasam Mr. Anushman RajaratnamDirector Director

By Order of the Board

Corporate Managers & Secretaries (Private) LimitedSecretaries

Colombo28th August 2019


Corporate Governance

Corporate Governance is a way of structuring the organization in order to safeguard the interests of a wide variety of stakeholders. It needs to balance the Corporate Governance with everyday business management in today’s dynamic corporate world. We at Lankem firmly promise our stakeholders better business performance which is nurtured and backed through properly formulated governance practices and procedures.

We present below the Corporate Governance practices adopted and practiced by Lankem Ceylon PLC, in accordance with those listed in the code of Best Practice on Corporate Governance issued by The Institute of Chartered Accountants of Sri Lanka and the rules on Corporate Governance set out in the Colombo Stock Exchange Listing Rules.

1. The Board of Directors

1.1 The Board, Composition and MeetingsThe Board of Directors of Lankem Ceylon PLC is responsible for the governance practices adopted in all the companies within the Group. As of the year ended 31st March 2019 the Board comprised of the Chairman, Deputy Chairman, Managing Director, and nine other Directors. All the Directors are professionals who have acquired a wealth of experience and knowledge in the fields of Management, Marketing and Finance.

Name of Director

Mr. S. D. R. Arudpragasam (Chairman)

Non-Executive

Mr. A. Hettiarachchy (Deputy Chairman)

Independent Non-Executive

Mr. D. L. Vitharana (Managing Director)

Executive

Mr. A. Rajaratnam Non-Executive (Resigned w.e.f. 31.03.2019)

Mr. Anushman Rajaratnam Executive

Mr. R. N. Bopearatchy Non Executive

Mr. K. P. David Executive

Mr. R. T. Weerasinghe Executive

Mr. A. C. S. Jayaranjan Independent Non-Executive

Mr. R. Seevaratnam Independent Non-Executive

Mr. P.M.A. Srimane Non-Executive

Mr. M.N.K. Jayamanne Executive (Appointed w.e.f. 01.04.2018)

Mr. M.M.A.R.P. Goonetileke Executive (Resigned w.e.f. 30.06.2018)

The Board has met 4 times during the year under review. In addition to Board Meetings, matters are referred to the Board and decided by resolutions in writing.

The number of meetings of the Board and the individual attendance by members is shown below:

Total number of Meetings held: 4

Name of Director Directorship Status

Board Meetings Attended

Mr. S. D. R. Arudpragasam ChairmanNon-Executive

4/4

Mr. A. Hettiarachchy Deputy Chairman – IndependentNon-Executive

4/4

Mr. D. L. Vitharana Managing Director Executive

2/4

Mr. A. Rajaratnam (Resigned w.e.f. 31.03.2019)

DirectorNon-Executive

Excused

Mr. Anushman Rajaratam Executive 2/4

Mr. R. N. Bopearatchy Non Executive 2/4

Mr. K. P. David Executive 3/4

Mr. R. T. Weerasinghe Executive 4/4

Mr. A. C. S. Jayaranjan Independent Non-Executive

4/4

Mr. R. Seevaratnam Independent Non-Executive

3/4

Mr. P.M.A. Sirimane Non-Executive 4/4

Mr. M.N.K. Jayamanne (Appointed w.e.f. 1st April 2018)

Executive 4/4

Mr. M.M.A.R.P. Goonetileke (Resigned with effect from 30th June 2018)

Executive Excused

Availability of Formal Schedule of MattersThe code of Best Practice on Corporate Governance of The Institute of Chartered Accountants of Sri Lanka suggests that the Board should have a formal schedule of matters specially reserved for its decision making. Sufficient time was dedicated at meetings in order to ensure the following.

y Offer guidance on overall direction and related strategies, financial and non-financial objectives of Lankem Ceylon PLC.

y Formulation, implementation and monitoring of business strategy of the Company.

y Overseeing the effectiveness of the internal control systems and proactive risk management system.

y Ensuring compliance with legal requirements and ethical standards.


Corporate Governance

y Approval of budgets, corporate plans, major investments and divestments.

y Approval of interim and annual Financial Statements for publication.

y Approval and review of the succession planning of the Board and top management.

y Approval of any issue of equity and debt securities of the Company.

y Any other matter which is important to ensure that the Company conducts its business in the best interest of all stakeholders.

Company Secretary and Independent Professional Advice Lankem Ceylon PLC and all the Directors seek advice from Corporate Managers & Secretaries (Private) Ltd, who are qualified to act as Secretaries as per the provisions of the Companies Act No. 07 of 2007. In addition, the Board seeks professional advice as and when, and where necessary from independent external professionals.

Independent JudgementThe Board of Directors as a whole and individually are committed to exhibit high standards of integrity and independence of judgement on various issues from strategy to performance.

Training for DirectorsThe Directors are provided with adequate and relevant training opportunities for their continuous development.

1.2 Segregation of the Role of Chairman and Chief Executive OfficerThe role of Chairman and Chief Executive Officer is clearly segregated. The Managing Director functions in the capacity of Chief Executive Officer who is responsible for the operational matters of the Company. Functional Directors are responsible for the respective division of strategic business units.

1.3 Chairman’s RoleThe Chairman oversees good governance of the Company’s affairs and monitors the satisfactory performance of duties and responsibilities allocated to the Board Members.

The Chairman conducts the Board Meetings ensuring effective participation of all Directors. The Chairman ensures that the Board is in complete control of the Company’s affairs.

1.4 Financial AcumenCurrently the Board includes six finance professionals who possess the knowledge to offer the Board necessary guidance on matters relating to finance.

1.5 Board BalanceThe Board at present comprises of six Non-Executive Directors of whom three are Independent and five Executive Directors. The Non-Executive Directors have submitted their declarations of their Independence or Non- Independence to the Board.

Mr. R. Seevaratnam serves on the Board of the Parent Company (PC) The Colombo Fort Land & Building PLC (CFLB) and has served on its Board for more than nine years. He also serves on the Boards of several subsidiaries of the PC where a majority of the Directors of certain subsidiaries serves on the Board of another and is on the Board of certain companies which has a significant shareholding in another. However, the Board after taking into consideration all other circumstances listed in the Rules pertaining to the criteria for defining independence is of the opinion that Mr. R. Seevaratnam is nevertheless Independent.

Mr. A.C.S. Jayaranjan and Mr. A. Hettiarachchy have served on the Board of the Listed Entity for over a period of nine years and are Directors on the Board of certain subsidiaries of the Company in which a majority of the Directors of the Company are Directors. However, the Board after taking into consideration all other circumstances listed in the Rules pertaining to the criteria for defining independence is of the opinion that Mr. A.C.S. Jayaranjan and Mr. A. Hettiarachchy are nevertheless Independent.

1.6 Supply of InformationLankem Ceylon PLC has set up procedures to receive timely information including a clear agenda prior to the meetings. Minutes of all the meetings are properly recorded and circulated among Directors.

Apart from Board Meetings, Executive Directors and Senior Managers meet bi-weekly or more frequently in order to discuss specific matters. Decisions and important information from these meetings are conveyed to all Board Members at the Board Meetings.

Monthly Accounts and key financial parameters and performance of each division are discussed and necessary action is taken.

1.7 Nomination Committee and Appointments to the BoardNew Directors are proposed for appointment by the Nomination Committee in consultation with the Chairman of the Company and in keeping with the provisions of the Articles of Association of the Company and the Rules on Corporate Governance.


The details of new appointments to the Board are made available to shareholders by making announcements to the Colombo Stock Exchange.

The Company’s Nomination Committee comprises of Mr. A. Hettiarachchy – Chairman, Mr. R. Seevaratnam, Independent Non Executive Directors and Mr. S.D.R. Arudpragasam, Non Executive Director.

1.8 Re- election of DirectorsIn terms of the Articles of Association of the Company, a Director appointed to the Board (other than an appointment to an Executive Office) holds office until the next Annual General Meeting and seeks re-election by the shareholders at that meeting. The Articles require one-third of Directors in office (excluding the office of Chairman, Managing or Joint Managing Director and any other Executive Office) to retire at each Annual General Meeting. The Directors to retire are those who have been longest in office since their last election. Retiring Directors are eligible for re-election by the shareholders.

2. Directors Remuneration

2.1 Remuneration CommitteeThe Remuneration Committee comprises of Mr. A. Hettiarachchy – Chairman, Mr. R. Seevaratnam, Independent Non Executive Directors and Mr. S.D.R. Arudpragasam, Non Executive Director.

The Remuneration Committee report is set out on page 20 of this report.

2.2 Disclosure of RemunerationAggregate remuneration paid to Directors is disclosed in Note 29.7 to the Financial Statements on page 97.

3. Relationship with Shareholders

3.1 Constructive Use of AGM/General MeetingsLankem Ceylon PLC always welcomes the active participation of shareholders at General Meetings in order to promote and continue an effective dialogue between the two parties. Opportunities are available to shareholders to raise questions from the Chairman and other Directors at the Annual General Meeting/General Meetings. The required number of days’ notice has been given in accordance with the Articles of Association of the Company and the Companies Act No. 07 of 2007.

3.2 Major TransactionsLankem Ceylon PLC publishes its Annual Report together with quarterly, half yearly, nine months and twelve months ended interim reports in order to communicate information to the shareholders in a timely manner. All material and price sensitive information are included in these reports together with major transactions if any during the particular period of reporting.

4. Accountability and Audit

4.1 Financial ReportingLankem Ceylon PLC and its Board of Directors consider timely publication of its Annual and Quarterly Financial Statements as a high priority. These publications include all material, financial and non financial information in order to facilitate the requirements of existing and potential shareholders. Financial Statements were prepared based on the Sri Lanka Accounting Standards (SLFRS / LKAS).

The Annual Report of the Board of Directors on the affairs of the Company is given on pages 11 to 14 of this Annual Report.

The Directors are of the belief that the Company is capable of operating in the foreseeable future after the adequate assessment of the Company’s financial position and resources. Therefore, the going concern principle has been adopted in the preparation of these Financial Statements. The Auditors’ Report on Financial Statements is given on pages 24 to 26 containing the Auditors’ reporting responsibility. Non-financial information of business segments is given on pages 27 to 107.

4.2 Internal ControlsThe Board of Directors takes overall responsibility for the Company’s internal control system. A separate Audit and Compliance Section has been established to review the effectiveness of the Company’s internal controls in order to ensure reasonable assurance that assets are safeguarded and all transactions are properly authorized and recorded.

4.3 Audit CommitteeThe Audit Committee report is set out on pages 22 and 23 of this report.

4.4 Related Party Transactions Review CommitteeThe Related Party Transactions are disclosed in Note 29.5 to the financial statements.

The Report of the Related Party Transactions Review Committee appears on page 21.


Risk Management

Risk management carries out the process of identification of potential risk exposure and the application of proper risk management strategies to mitigate the impact to the business. Being a diversified conglomerate, a comprehensive risk approach is vital to the Company for the appropriate and adequate execution of risk management to accomplish the strategic objectives.

The risk management of the Company includes ongoing risk assessment procedures and standardized reviews operation to the support of long-term strategies, regulatory and litigation compliance, health and safety, environmental compliance, financial reporting and controls and information technology and security.

The Board of Directors of Lankem Ceylon PLC has the overall responsibility for risk oversight with a focus on the most significant risks facing the Company. The Company has established comprehensive internal control systems and other risk mitigation techniques to ensure the delivery of shareholder value and completion of its obligations to all other stakeholders.

1. Strategic RisksStrategic risk consists of the factors which challenge the accomplishment of the strategic goals of the Company, including the market factors, industry trends, competitor activities, technological threats, innovation and state policy on businesses.

2. Operational RiskOperational risks arise from the day to day activities of the business including the inappropriate application of procedures in the processes. The Company has developed standard operating procedures to implement the best practices and a sound internal control system to monitor the effectiveness of operations. Continuous assessments and monitoring activities are made by the Compliance Department to keep all risks in the acceptable limit.

3. Financial RiskFinancial risk covers the broad area of risk including the internal risk of application of accounting policies and external risks from financial market conditions mainly incorporating credit risk and market risk stemming from business operations.

3.1 Credit Default Risk Management Credit default risks arise due to the non-payment by debtors which can lead to working capital issues. The Company implements proper credit controls and debt collection policies to ensure that the Company chooses the distributors with reliability and financial viability to honor their debts.

3.2 Market Risk Management Market risk refers to the risk arising from the volatilities in the market forces. The Company faces market risks in the financial sphere in terms of the local rates of interest, inflation and exchange rates. In the present economic conditions, the Company is in a stable position to manage its interest rate risk and practical fluctuations. To facilitate to mitigate the risks, the Company has continuously implemented the mitigation techniques, carefully evaluating the market factors and applying adequate controls.

3.2.1 Foreign Exchange Risk

The Company operates in a business model where the dependency on imports for raw material items is high. As a result, the exposure to foreign exchange risk is reasonably high. The fluctuation in foreign exchange rates results in transaction of risk. The Company uses forward exchange rates for reporting purposes on the assumption that future spot rates will fall below the forward rate. By this means the Company effectively provides for its foreign exchange exposure by minimising any adverse impact.

3.2.2 Interest Rate Risk

The Company has faced increasing finance costs due to prevailing high interest rate regimes. The Company has been restructuring its debt portfolio on a continuous basis to minimise the downside risk of rising interest rates. Going forward, the Company is committed to reducing its level of debt in order to ensure that finance costs are retained under control.

3.2.3 Inflation Rate Risk

The Company serves both individual and institutional clients. Hikes in inflation rates due to the economic conditions deteriorate the purchasing power of customers. This reduces the potential market demand for our products and increase the Company’s cost base, affecting the profitability margins. The Company closely monitors fluctuations in price levels and focuses on the efficient management of its cost base to ensure minimal increase in price to customers.

3.2.4 Liquidity Risk

Due to the nature of the industry where the Company operates, a strong adherence to clear working capital management policies is much significant to the Company. The Company has been continuously revising the limits on approved credits, allowed provisions, cash and cash equivalents and feasible short term investment and funding options.


3.2.5 Investment Risk

Investment risk incorporates the threat of investments not yielding the anticipated results. The Company has in the recent past focused on organic growth. The Company conducts detailed feasibility studies and selects projects only exceeding the expected rate of return. Further regular controlling and monitoring of the performance of newly implemented projects are carried out. Moreover, suitable feedback controls are implemented to rectify any issues that may arise as well as feed forward controls are established to deter the reoccurrences of adverse variances. In addition, investments in capital and money markets are also closely monitored to avoid and mitigate risk of investment returns due to the market conditions.

Business Risk

New entrants into markets that the Company is already present as well as intensification of competition from existing market players are significant business risks that may challenge the market share of the Company. Further, the variation in consumer spending patterns is also a potential business risk. The Company researches and updates the market information for its decision making in order to effectively manage the business risk.

Counterparty Risk

The Group may be exposed to the risk of losses on cash and other financial instruments held or managed on its behalf by financial institutions, in the instance that its counterparties default on their obligations. The Group policy is to limit its exposure by dealing solely with leading counterparties and monitoring their credit ratings.

Industrial and Environmental Risks

The Group may be exposed to capital costs and environmental liabilities because of its past, present or future operations. The main industrial and environmental risks result from the storage of chemicals at certain sites and the waste generated from production process. These risks are predominantly managed by obtaining certifications and new methods through research and development, subject to specific legislation and close supervision by the relevant authorities.

Legal and Compliance

The Company addresses this area with great concern in order to protect its corporate reputation. Legal and compliance risk relates to changes in the statutory and regulatory environment, compliance requirements with policies and procedures, including those relating to financial reporting, health and safety and intellectual property risks. Statutory and regulatory risk is the risk that the government or regulatory actions will cause us to have to change our business models or practices. The Company implements ongoing assessments on the strict adherence to all necessary regulations in relation to statutes, regulatory guidelines and environmental rules.


Remuneration Committee Report

The Remuneration Committee comprises of the following members:

Mr. A. Hettiarachchy Chairman - Independent/ Non-Executive Director

Mr. S.D.R. Arudpragasam Member - Non-Executive Director

Mr. R. Seevaratnam Member - Independent/ Non-Executive Director

The main function of the Remuneration Committee is to assist the Board in developing and administering an equitable and transparent method for setting policy on the overall human resources strategy of the Group, the remuneration of Directors and senior management of the Group, and for determining their remuneration packages, on the basis of their merit, qualifications, and competence, and having regard to the Company’s operating results, individual performance, and comparable market statistics.

The Managing Director assists the Committee by providing relevant information and participating in the deliberations of the Committee.

The key objective of the committee is to attract, motivate and retain qualified and experienced personnel and to ensure that the remuneration of executives at each level of management is competitive and are rewarded in a fair manner based on their performance.

Mr. A. HettiarachchyChairmanRemuneration Committee

28th August 2019


Related Party Transactions Review Committee ReportThe Related Party Transactions Review Committee (RPTRC) which was formed in conformity with the Listing Rules of the Colombo Stock Exchange is entrusted with the responsibility of ensuring compliance with the rules and regulations governing Related Party Transactions for Listed Entities its main focus being enhancement of corporate transparency and fairness to all stakeholders.

CompositionThe Company’s Related Party Transactions Review Committee comprises of the following members:

Mr. R. Seevaratnam Chairman - Independent/Non-Executive Director

Mr. A. Hettiarachchy Independent/Non-Executive Director

Mr. A.C.S. Jayaranjan Independent, Non - Executive Director

The Company’s Secretaries Corporate Managers & Secretaries (Private) Limited functions as the Secretaries to the Related Party Transactions Review Committee.

Meetings of the CommitteeThe Related Party Transactions Review Committee has met on two occasions during the financial year ended 31st March 2019 and the number of Meetings and the individual attendance by members are as follows:

Mr. R. Seevaratnam – Chairman 2/2

Mr. A. Hettiarachchy 1/2

Mr. A.C.S. Jayaranjan 2/2

Further during the said period, on six occasions the RPTRC has reviewed and recommended Related Party Transactions in respect of the Company by Resolutions in writing which the Committee for purpose hereof construe as equivalent to meetings being held.

Other members of the Board and the Management were present at discussions where appropriate. The proceedings of the RPTRC are regularly reported to the Board of Directors.

Functions of the Committee y Review all proposed Related Party Transactions (Except for

exempted transactions).

y Determining whether the relevant Related Party Transaction is fair to, and in the best interests of the Company and its stakeholders.

y Obtain updates on previously reviewed Related Party Transactions from Senior Management and approve any material changes.

y Establish guidelines for Senior Management to follow in ongoing dealings with related parties.

y Direct the transactions for Board approval / Shareholder approval as deemed appropriate.

y Ensuring that immediate market disclosures and disclosures in the Annual Report as required by the applicable rules and regulations are made in a timely and detailed manner.

ConclusionThe Related Party Transactions Review Committee has reviewed the Related Party Transactions entered into during the financial year under review and has communicated its comments and observations to the Board of Directors.

The Board of Directors have also declared in the Annual Report that there were no recurrent related party transactions which exceeded the respective thresholds mentioned in Section 9 of the Colombo Stock Exchange Listing Rules. However non-recurrent related party transactions which exceeded the respective disclosure thresholds are duly set out on page 96 of the Annual Report. The Company has complied with the requirements of the Listing Rules on Related Party Transactions.

R. SeevaratnamChairmanRelated Party Transactions Review Committee

28th August 2019


Audit Committee Report

The Audit Committee has the responsibility of assisting the Board in fulfilling its overall responsibility to the shareholders in relation to the integrity of the Company’s financial reporting process in accordance with the Companies Act and other legislative reporting requirements including the adequacy of disclosures in the financial statements in accordance with the Sri Lanka Accounting Standards. The Audit Committee also has responsibility to ensure that the internal controls of the Company are in accordance with legal and regulatory requirements. The Committee evaluates the performance and the independence of the Company’s external audit functions.

CompositionThe Company’s Audit Committee comprises of two Independent Non – Executive Directors of Lankem Ceylon PLC (LCPLC) an Independent Non – Executive Director of E.B. Creasy & Company PLC (EBC) and an Independent Non – Executive Director of The Colombo Fort Land & Building PLC (CFLB) (Parent Company).

The Names of the members are given below:

Mr. A. C. S. Jayaranjan - Chairman(Independent, Non-Executive Director (LCPLC)

Mr. A. Hettiarachchy(Independent, Non-Executive Director (LCPLC)

Mr. A. R. Rasiah(Independent, Non-Executive Director (EBC)

Mr. A. M. de S. Jayaratne(Independent, Non-Executive Director (CFLB)

The Committee has a blend of experience in the commercial sector with financial expertise and high standing of integrity and business acumen in order to carry out their role effectively and efficiently. The Committee comprises of three finance professionals.

The Company’s Secretaries, Corporate Managers & Secretaries (Private) Limited function as the Secretaries to the Audit Committee.

Meetings and AttendanceThe Audit Committee has met on four occasions during the financial year ended 31st March 2019 and the attendance was as follows:

Mr. A. C. S. Jayaranjan – Chairman 4/4

Mr. A. Hettiarachchy 2/4

Mr. A. R. Rasiah 4/4

Mr. A. M. de S. Jayaratne 4/4

The Managing Director and the Chief Financial Officer also attends meetings of the Audit Committee. Further other members of the Board and the Management Committee, as well as the External Auditors were present at discussions where appropriate. The proceedings of the Audit Committee are regularly reported to the Board of Directors.

Terms of ReferenceThe Committee is governed by the specific terms of reference set out in the Audit Committee Charter. The Committee focuses on the following objectives in discharging its responsibilities taking into consideration the terms of reference together with the requirements of the Listing Rules of the Colombo Stock Exchange.

(a) Risk Management

(b) Efficiency of the system of internal controls

(c) Independence and objectivity of the external (statutory) Auditors

(d) Appropriateness of the principal accounting policies used

(e) Financial Statement integrity


ComplianceDuring the year under review, the Committee has assisted the Board in ensuring compliance with the statutory provisions prior to publication of Interim Financial Statements and the Annual Report. The Committee has taken necessary measures to ensure that Interim Financial Statements and the Annual Report are published in a timely manner and they are prepared and presented in accordance with the Sri Lanka Accounting Standards and also in compliance with the Companies Act and the regulatory requirements. The Committee has assessed the adequacy of existing controls and risk management procedures and recommends to the Board, additional controls and risk mitigating strategies that could be implemented to strengthen the existing internal control system. Further the Committee has reviewed the routine operations of the Company and assessed the future prospects of its business operations and accordingly makes sure that the going concern assumption used in the preparation of the financial statements, is appropriate.

External AuditThe Company has appointed KPMG, Chartered Accountants, as its External Auditors for the financial year ended 31st March 2019 and the services provided by them are segregated between audit/assurance services and other advisory services. The Committee has reviewed the progress and the conduct of the statutory audit function and discussed the audit-related issues with the Auditors. KPMG Chartered Accountants has also issued a declaration as required by the Companies Act No. 07 of 2007, that they do not have any relationship or interest in any of the companies in the Group, which may have a bearing on the independence of their role as Auditors. The Committee after evaluating the independence and performance of the External Auditors has recommended to the Board the reappointment of KPMG, Chartered Accountants, for the financial year ending 31st March 2020 subject to the approval of the Shareholders at the Annual General Meeting of the Company.

A. C. S. JayaranjanChairman Audit Committee

28th August 2019


Independent Auditor’s Report

TO THE SHAREHOLDERS OF LANKEM CEYLON PLC

Report on the Audit of the Financial Statements

OpinionWe have audited the Financial Statements of Lankem Ceylon PLC (“the Company”) and the Consolidated Financial Statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31st March 2019, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the Financial Statements, including a summary of significant accounting policies and other explanatory information as set out on pages 27 to 107.

In our opinion, the accompanying Financial Statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31st March 2019, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for OpinionWe conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Company Financial statements and the Consolidated Financial Statements of the current period. These matters were addressed in the context of our audit of the Company Financial statements and the Consolidated Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment of Investment in Subsidiaries and Equity Accounted Investees

(Refer to the significant accounting policy in Note 3.1 and explanatory Note 17 to the Financial Statements).

Risk DescriptionThe Company has recorded investments in subsidiaries amounting to Rs.3,738 million and investments in equity-accounted investees amounting to Rs. 323 million as at 31st March 2019. Further, the Company has provided Rs. 574 million and Rs. 31 million as provision for impairment of investment in subsidiaries and equity-accounted investees respectively as at 31st March 2019.

The carrying amounts of each investment in subsidiaries and equity accounted investees have been tested for impairment as individual Cash Generating Units. The carrying amount of these investments could be materially misstated due to inappropriate judgments and estimates used by the management in calculating the recoverable amount for each cash generating units (“CGU”) as part of their impairment assessment.

Investments which do not generate adequate returns may be an indication of impairment. Due to the investments being material in the financial statements, it will have significant impact on the financial performance of the Company.

We have identified the impairment of investments in subsidiaries and equity-accounted investees as a key audit matter due to the magnitude of the amounts recognized in the financial statements as well as estimation uncertainty involved in determining the impairment amounts.

Our audit procedures included;

y Evaluating the carrying amounts and the recoverable amount of each investments in order to identify any impairment indication under accounting standards.

y Assessing the management’s basis used to determine the carrying value of the investments by our own expectations based on our knowledge of the investments and experience of the industry in which it operates.

y Assessing the credibility of business plan and cash flow forecasts used by the management for the assessment of recoverability of the investments.


y Assessing the accuracy of management’s assumptions to externally derived data as well as our own assessments in relation to key inputs such as projected economic growth, competition, cost inflation and discount rates.

y Assessing the adequacy of disclosures in the Financial Statements in relation to impairments of investments in subsidiaries and equity accounted investees.

Revaluation of Freehold Lands

(Refer to the significant accounting policy in Note 3.5.3 and explanatory Note 12.4 to the Financial Statements).

Risk DescriptionThe Group has revalued its freehold lands and reported a carrying value of Rs. 5,141 million as at 31st March 2019 and recognized a revaluation gain of Rs. 2,924 million for the year ended 31st March 2019.

The group has engaged external professional valuers with appropriate expertise to determine the fair value of the freehold lands in accordance with recognized industry standards.

We identified this as a key audit matter because of the magnitude of the amounts recognized in the financial statements and significant judgments and estimates involved in assessing the fair value of the freehold lands.

Our audit procedures included;

y Assessing the competency, objectivity and capabilities of the independent external valuers engaged by the management.

y Discussion with management and the external valuers and comparing the key assumptions used against externally published market comparable, where applicable or with other benchmark data and challenging the reasonableness of key assumptions based on our knowledge.

y Engaging our own internal resources to assess the reasonability of the valuation technique, per perch and per square feet prices.

y Assessing the appropriateness of the valuation technique used by the external valuers taking in to account the profile of the land.

y Evaluating the adequacy of the disclosures in the financial statements in accordance with the relevant accounting standards.

Impairment of Trade Receivables

(Refer to the significant accounting policy in Note 3.2.2.2 and explanatory note in Note 19 to the Financial Statements).

As disclosed in Note 19 to the Financial Statements, the group has recognized trade receivables balance of Rs. 3,611 Million as at 31st March 2019, after netting off of provision for impairment of Rs.328 Million.

With the application of SLFRS 9 – Financial Instruments, the Group has estimated provision for impairment based on the expected credit losses to be incurred, which is estimated by taking into account the credit history of the customers, current and forecasted market and economic conditions, all of which involves a significant degree of management judgment.

We identified impairment of trade receivables as a key audit matter for our audit, as it requires management to exercise subjective judgement in making assumptions and estimates for the assessment of impairment allowance on trade receivables.

Our audit procedures include,

y Evaluating the appropriateness of the impairment methodology adopted by the Group in accordance with SLFRS 9 and challenging the key assumptions and evaluating the reasonableness of the key judgments and methodology used by the management with the assistance of our specialists.

y Evaluating the completeness, accuracy and relevance of data used in preparation of the impairment provision and transition adjustments.

y Comparing the economic factors used in the models to market information to assess whether they are aligned with the market and economic development.

y Evaluating the adequacy of the Group’s disclosures regarding the degree of judgments and estimation involved in arriving at the provision for impairment of trade receivables and transition adjustments.

Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the Financial Statements and our auditor’s report thereon.

Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial StatementsManagement is responsible for the preparation of Financial Statements that give a true and fair view in accordance with


Independent Auditor’s Report

Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

y Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

y Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control.

y Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

y Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the

Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

y Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

y Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 3029.

Chartered Accountants Colombo, Sri Lanka

28th August 2019


Consolidated Company

For the Year Ended 31st March Notes

2019Rs.’000

2018 Rs.’000

2019Rs.’000

2018 Rs.’000

Revenue 5 17,659,156 18,479,195 3,229,414 4,204,150

Cost of Sales (14,430,374) (15,101,896) (2,753,439) (3,471,902)

Gross Profit 3,228,782 3,377,299 475,975 732,248

Other Income 6 316,571 638,586 258,604 452,592

Distribution Expenses (1,070,959) (1,268,654) (370,680) (536,598)

Administration Expenses (1,783,221) (1,720,127) (313,663) (379,279)

Other Expenses 7 (101,939) (40,464) (170,517) (125,265)

Share of Loss of Associate (334,521) (97,602) - -

Share of Profit / (Loss) of Joint Venture 46,659 (20,697) - -

Net Finance Costs 8 (1,351,328) (1,217,496) (685,392) (704,812)

Loss before Tax 9 (1,049,956) (349,155) (805,673) (561,114)

Income Tax Reversal / (Expenses) 10 165,676 (127,949) 240,483 46,295

Loss for the Year (884,280) (477,104) (565,190) (514,819)

Other Comprehensive Income / (Expense)

Gain / (Loss) on Financial Assets Designated at Fair Value through Other Comprehensive Income / AFS (17,430) 24,694 (17,104) 25,448

Financial Assets designated at Fiar Value through Other Comprehensive Income / AFS - Reclassified to profit or loss - (13,710) - (11,870)

Actuarial Gain/(Loss) on Defined Benefit Obligations 31,072 (75,892) 7,337 (45,059)

Revaluation Surplus 3,011,962 - 824,803 -

Tax Effect on Actuarial Gain or Loss & Revlauation surplus (713,885) 13,791 (232,999) 12,617

Other Comprehensive Income / (Expense) for the year, net of tax 2,311,719 (51,117) 582,037 (18,864)

Total Comprehensive Income / (Expense) for the year 1,427,439 (528,221) 16,847 (533,683)

Loss Attributable to:

Owners of the Company (982,564) (583,357) (565,190) (514,819)

Non-Controlling Interests 98,284 106,253 - -

(884,280) (477,104) (565,190) (514,819)

Total Comprehensive Income Attributable to

Owners of the Company 698,717 (622,983) 16,847 (533,683)

Non-Controlling Interests 728,722 94,762 - -

1,427,439 (528,221) 16,847 (533,683)

Basic Loss per Share (Rs.) 11 (29.02) (25.45) (16.70) (22.46)

The Notes from pages 31 to 107 form an integral part of these Financial Statements.Figures in brackets indicate deductions.

Statement of Profit or Loss and Other Comprehensive Income


Statement of Financial PositionConsolidated Company

As at 31st MarchNotes

31.03.2019 Rs. ’000

31.03.2018 Rs. ’000

31.03.2019 Rs. ’000

31.03.2018 Rs. ’000

ASSETSNon-Current AssetsProperty, Plant and Equipment 12 8,749,439 5,853,743 1,335,073 639,209Biological Assets 13 - - - - Leasehold Properties 14 - - - - Investment Properties 15 363,087 448,644 - - Intangible Assets 16 1,170,226 1,170,226 - - Investments in Subsidiaries 17.1 - - 3,163,936 3,245,273Investments in Associates 17.2 149,713 484,234 291,399 322,500Investments in Joint Venture 17.3 333,802 287,143 - -Investments Classified as Available for Sale/ Fair Value through OCI 17.4 41,977 64,186 39,546 61,157Deferred Tax Assets 26 - - 118,541 111,058Total Non-Current Assets 10,808,244 8,308,176 4,948,495 4,379,197Current AssetsInventories 18 2,374,752 2,026,676 643,382 596,092 Trade & Other Receivables 19 4,294,255 4,479,372 819,009 1,054,717 Amounts Due from Related Parties - Trade 29.1 - - 1,947 9,164 Amounts Due from Related Parties - Non Trade 29.1 330,300 241,044 512,429 450,484 Loans Due from Related Parties 29.2 115,700 115,700 83,485 85,700 Income Tax Recoverable 59,202 53,102 24,464 24,457 Investments Classified as Fair Value through Profit or Loss 17.5 33,015 68,411 33,015 68,411 Cash and Cash Equivalants 20 490,471 1,210,568 37,484 753,696 Asset held for sale 21 67,365 60,000 67,365 60,000 Total Current Assets 7,765,060 8,254,873 2,222,580 3,102,721Total Assets 18,573,304 16,563,049 7,171,075 7,481,918

EQUITY AND LIABILITIESEquityStated Capital 22 930,346 930,346 930,346 930,346Other Capital Reserves 23.1 4,833 4,833 - - Revaluation reserve 1,679,064 - 593,858 - Available for Sale Reserves 23.2 (4,706) 12,734 (2,982) 14,122Retained Earnings / (Accumulated Losses) (380,822) 608,907 (491,028) 111,864Equity Attributable to Owners of the Company 2,228,715 1,556,820 1,030,194 1,056,332 Non-Controlling Interest 2,793,360 2,129,658 - - Total Equity 5,022,075 3,686,478 1,030,194 1,056,332

LIABILITIESNon-Current LiabilitiesInterest Bearing Borrowings 24 3,965,671 2,607,274 2,281,249 1,536,621Deferred Income 25 11,946 14,769 - - Deferred Tax Liabilities 26 583,965 198,199 - - Retirement Benefit Obligations 27 253,379 264,371 127,390 127,503 Total Non-Current Liabilities 4,814,961 3,084,613 2,408,639 1,664,124

Current LiabilitiesInterest Bearing Borrowings 24 3,620,201 4,976,244 1,437,663 2,603,335Loans Payable to Related Parties 24.2 215,144 158,144 148,090 132,164Trade & Other Payables 28 2,932,068 2,559,633 1,227,752 966,896Amounts Due to Related Parties - Trade 29.4 - - 2,308 10,355Amounts Due to Related Parties - Non Trade 29.4 890,866 600,839 398,376 270,288Income Tax Payable 91,974 95,123 - - Bank Overdraft 20 986,015 1,401,975 518,053 778,424 Total Current Liabilities 8,736,268 9,791,958 3,732,242 4,761,462Total Liabilities 13,551,229 12,876,571 6,140,881 6,425,586Total Equity and Liabilities 18,573,304 16,563,049 7,171,075 7,481,918

Net Assets per Share (Rs.) 65.84 45.99 30.43 31.20

The Notes from pages 31 to 107 form an integral part of these Financial Statements.I certify that these Financial Statements have been prepared in compliance with the requirements of the Companies Act. No. 07 of 2007.

Asoka PiyadigamaChief Financial OfficerThe Board of Directors are responsible for the preparation and presentation of these Financial Statements.Approved and signed for and on behalf of the Board of Directors of Lankem Ceylon PLC.

Mr. S. D. R. Arudpragasam Mr. Anushman RajaratnamDirector DirectorColombo28th August 2019


Statement of Changes in EquityAttributable to Owners of the Company

Group

Stated Capital

Rs. ‘000

Other Capital

Reserves

Rs. ‘000

Available for Sale

Reserves

Rs. ‘000

Retained Profit /

(Accumulated Loss)

Rs. ‘000

Revaluation Reserves

Rs. ‘000

Total

Rs. ‘000

Non- Controlling

Interest

Rs. ‘000

Total

Rs. ‘000

Balance as at 01st April 2017 536,218 4,833 1,750 1,340,938 - 1,883,739 2,237,370 4,121,109 Right Issue 394,128 - - - - 394,128 - 394,128 Direct cost on Right Issue - - - (1,009) - (1,009) - (1,009)Effect of Acquisitions, Disposals and changes in Percentage Holding in Subsidiaries - - - 2,716 - 2,716 (38,567) (35,851)Profit /(Loss) for the year - - - (583,357) - (583,357) 106,253 (477,104)Other Comprehensive Income for the year - - 10,984 (50,610) - (39,626) (11,491) (51,117)Deffered tax on revaluation surplus on land - - - (99,771) - (99,771) (89,583) (189,354)Dividend Paid - - - - - - (74,324) (74,324)Balance as at 31st March 2018 930,346 4,833 12,734 608,907 - 1,556,820 2,129,658 3,686,478

Balance as at 01st April 2018 930,346 4,833 12,734 608,907 - 1,556,820 2,129,658 3,686,478 Adjustment on initial application of SLFRS - 9 - - - (25,750) - (25,750) - (25,750)Adjusted balance as at 1st April 2018 930,346 4,833 12,734 583,157 - 1,531,070 2,129,658 3,660,728 Effect of Acquisitions, Disposals and changes in Percentage Holding in Subsidiaries - - - (1,070) - (1,070) 1,554 484 Profit /(Loss) for the year - - - (982,564) - (982,564) 98,284 (884,280)Other Comprehensive Income for the year - - (17,440) 19,655 1,679,064 1,681,279 630,439 2,311,718 Dividend Paid - - - - - - (66,575) (66,575)Balance as at 31st March 2019 930,346 4,833 (4,706) (380,822) 1,679,064 2,228,715 2,793,360 5,022,075

Company

Stated Capital

Rs. ‘000

Available for Sale

Reserves Rs. ‘000

Revaluation Reserves

Rs. ‘000

Retained Profit /

(Accumulated Loss)

Rs. ‘000

Total

Rs. ‘000

Balance as at 01st April 2017 536,218 544 - 684,600 1,221,362 Right issue 394,128 - - - 394,128 Direct cost on Right Issue - - - (1,009) (1,009)Loss for the year - - - (514,819) (514,819)Deffered tax effect on revaluation surplus - - - (24,466) (24,466)Other Comprehensive Income for the year - 13,578 - (32,442) (18,864)Balance as at 31st March 2018 930,346 14,122 - 111,864 1,056,332

Balance as at 01st April 2018 930,346 14,122 - 111,864 1,056,332 Adjustment on initial application of SLFRS - 9 - Impact on trade receivables - - - (23,343) (23,343) - Impact on amounts due from related companies - - - (19,642) (19,642)Adjusted balance as at 1st April 2018 930,346 14,122 - 68,879 1,013,347 Revaluation of Land - - 824,803 - 824,803 Deffered tax impact on revaluation surplus - - (230,945) (2,054) (232,999)Loss for the year - - - (565,190) (565,190)Other Comprehensive Income for the year - (17,104) - 7,337 (9,767)Balance as at 31st March 2019 930,346 (2,982) 593,858 (491,028) 1,030,194

The Notes from pages 31 to 107 form an integral part of these Financial Statements.Figures in brackets indicate deductions.



For the Year Ended 31st March Notes 2019 Rs. ‘000

2018 Rs. ‘000

2019 Rs. ‘000

2018 Rs. ‘000

Cash Flow from Operating Activities Loss before Taxation (1,049,956) (349,155) (805,673) (561,114)Adjustments for : Depreciation /Amortisation / Impairment 9 457,068 494,517 66,536 93,097 Dividend Income 6 (8,534) (2,692) (98,621) (77,023)Loss / (Gain) on fair value through P&L Investments 8 20,728 (69,283) 20,728 (69,283)Loss / (Gain) on disposals of AFS Investments - (20,020) 3,289 (45,239)Interest Expense 1,333,723 1,404,800 766,538 910,942 Amortization of Grant 25 (2,823) (2,823) - - (Profit) / Loss on Disposal of Property, Plant & Equipment (172,881) (450,391) (141,435) (284,652)Exchange Loss/(Gain) 79,583 (62,359) (9,660) (42,839)Interest Income (82,705) (55,662) (91,411) (94,008)Defined Benefit Plan Cost - Retiring Gratuity 70,856 46,106 23,985 16,514 Impairment of AFS investments - 3,175 - 3,175 Write Back of Creditors (14,545) (3,576) (6,292) (2,538)Share of Loss from Associate 17.2 334,521 97,602 - -Share of (Profit) / Loss of Joint Venture (46,659) 20,697 - -Provision for Impairment of Investment in Associates - - 31,101 -Provision for Impairment of Investment in Subsidiaries - - 79,431 39,759 Provision for Impairment of Other Receivables - 37,289 - 37,289 Provision for Impairment of Trade Receivables 36,467 30,620 21,646 52,980 Provision / (Reversal) for Impairment of Related Parties (197) (30,700) 27,623 13,301 Provision made for Inventories 35,954 2,684 16,397 34,561 Operating Profit before Working Capital Changes 990,600 1,090,829 (95,818) 24,922 (Increase) / Decrease in Inventories (384,030) 748,110 (63,687) 614,040 (Increase) / Decrease in Trade and Other Receivables 148,652 (101,192) 192,672 178,921 (Increase) / Decrease in Amounts due from Related Parties (89,453) (10,841) (69,674) (41,462)Increase / (Decrease) in Trade and Other Payables 409,126 (468,674) 289,231 (388,955)Increase / (Decrease) in Amounts due to Related Parties 290,027 214,486 126,198 18,325 Cash Generated from Operations 1,364,922 1,472,718 378,922 405,791 Income Tax Paid (165,596) (179,406) (8) - Interest Paid (1,333,723) (1,392,128) (688,504) (793,173)Gratuity Paid (56,312) (131,003) (15,421) (77,397)Gratuity refund from planed assets 6,896 78,473 - 67,859 Net Cash used in Operating Activities (183,813) (151,346) (325,011) (396,920)

Cash Flow from Investing Activities Purchase & Construction of Property, Plant & Equipment (463,093) (399,007) (7,179) (56,655)Investment in Subsidiaries - (662,615) - (320,181)Net Disposal / (Investment) in FVOCI/AFS & FVTPL Investments - 141,231 (10,676) 162,248 Procced from disposal of subsidiaries - - 484 138,122 Procced from disposal of Fair Value through OCI/ AFS & FVTPL Investments - - 26,031 -Acqusition of Joint Venture - (36,570) - -Interest Received 82,705 55,662 951 4,443 Dividend Received 1,036 2,692 61,024 77,023 Proceeds from Disposal of Property, Plant & Equipment 266,416 823,203 203,654 734,405 Net Cash Generated from / (Used in) Investing Activities (112,936) (75,404) 274,289 739,405

Cash Flow from Financing Activities Dividend Paid (66,575) (74,324) - - Proceeds from Right Issue - 394,128 - 394,128 Direct cost on Right Issue - (1,009) - (1,009)Proceeds from Long Term Loans 2,982,715 1,155,941 1,495,149 666,445 Repayment of Long Term Loans (1,737,841) (931,461) (1,039,304) (541,025)Net Lease payment during the year (611) (3,026) - -Net movement in Short Tern Borrowings (1,242,076) 443,672 (876,890) 36,754 Loans Obtained from Related Parties 150,000 262,544 285,000 391,199 Settlement of Loans obtained from Related Parties (93,000) (530,500) (269,074) (742,086)Net Cash Generated from / (Used in) Financing Activities (7,388) 715,965 (405,119) 204,406

Net Increase / (Decrease) in Cash & Cash Equivalents (304,137) 489,215 (455,841) 546,891 Cash & Cash Equivalents at the beginning of the year (191,407) (680,622) (24,728) (571,619)Cash & Cash Equivalents at the end of the year 20 (495,544) (191,407) (480,569) (24,728)

The Notes from pages 31 to 107 form an integral part of these Financial Statements Figures in brackets indicate deductions.

Cash Flow Statement


Notes to the Financial Statements

1. REPORTING ENTITY

1.1. Domicile and Legal FormLankem Ceylon PLC (the “Company”) is a public limited liability company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The registered office of the Company is situated at No 98, Sri Sangaraja Mawatha, Colombo 10, Sri Lanka. The Consolidated Financial Statements of the Company as at and for the year ended 31st March 2019 comprise of the Company and its subsidiaries (together referred to as the “Group” and individually as ‘Group entities’) and the Group’s interest in Associates.

1.2. Principal Activities and Nature of the OperationLankem Ceylon PLC, manages a portfolio of investments consisting of a range of diverse business operations. The principal business line of the Company is manufacturing and distributing of chemicals, paints and consumer products.

There were no significant changes in the nature of the principal business activities of the Companies in the Group during the financial year under review.

1.3. Parent Company and Ultimate Parent CompanyThe immediate and ultimate holding company of Lankem Ceylon PLC is The Colombo Fort Land & Building PLC.

2. BASIS OF PREPARATION

2.1 Statement of ComplianceThe Financial Statements of the Company and those consolidated with such, comprise of the Statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows, together with Accounting Policies and Notes to the Financial Statements. The consolidated Financial Statements have been prepared in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS), as issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the requirements of the Companies Act No. 07 of 2007.

The Consolidated Financial Statements for the year ended 31st March 2019 were authorised for issue by the Board of Directors on 28th August 2019.

This is the first set of Financial Statements in which SLFRS 15 Revenue from Contracts with Customers and SLFRS 09, Financial Instruments have been applied. Changes to significant accounting policies are described in Note No. 3.2

2.2 Basis of MeasurementThe Consolidated Financial Statements have been prepared on the historical cost basis and applied consistently with an adjustment being made for inflationary factors affecting the Financial Statements except for the following:

y Retirement Benefit Obligation

y Class of Land under Property, Plant and Equipment is valued under Revaluation model.

y Financial Assets Classified at fair value through Profit and Loss

y Financial Assets classified at Fair Value Through Other Comprehensive Income

2.3 Use of Estimates, Judgments and AssumptionsThe preparation of the Consolidated Financial Statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments, estimates and assumptions in applying accounting policies that could have a significant effect on the Financial Statements are mentioned below:

Policy No.

Investment in Subsidiaries: whether the Group has control over an investee;

3.1.3

Measurement of Fair Value of Financial Instruments 3.4

Measurement of Intangible Assets 3.8

Impairment of Financial Assets 3.11

Valuation of Employee Benefit Obligations 3.15

Provisions, Contingent Assets and Liabilities 3.16

Deferred Tax Assets & Liabilities 3.20.2

2.3.1. Assumptions and Estimation Uncertainties

Information about the assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustments in the year ended 31st March 2019 is included in the following notes.

Note 27 : Measuring of defined benefit Obligations: Key actuarial assumptions

Note 26 : Recognition of deferred tax liabilityNote 19 : Impairment test: key assumptions underlying recoverable

amountsNote 12.4 : Valuation of Property Plant and Equipment


Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on net basis, or to realize the assets and settle the liability simultaneously.

2.7 Going ConcernThe management has made an assessment of its ability to continue as a going concern an it is satisfied that it has the resources to continue in business for the foreseable future. Therefore the financial statement of the group continue to be prepaired on a going concern basis.

3. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements, unless otherwise indicated.

3.1 Basis of Consolidation

3.1.1 Business Combinations

Business combinations are accounted for using the acquisition method as at the acquisition date - i.e. when control is transferred to the Group. Control over and investee is achieved when the Group is exposed or has right, to variable returns from its’ involvement with the investee and has the ability to affect those returns through its power over the investee.

The Group measures goodwill at the acquisition date as:

- The fair value of the consideration transferred; plus

- The recognised amount of any non-controlling interests in the acquiree; plus

- If the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

- The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships, such amounts are generally recognised in Profit or Loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

2.3.2 Measurement of Fair Values

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

The Group has an established control framework with respect to the measurement of fair values.

When measuring fair value of an asset or liability, the Group uses observable market data as far as possible. Fair Values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques permited by SLFRS 13 as follows,

Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 : inputs other than quoted prices included in Level 1 that are observable for the asset or Liability either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3 : inputs for the asset or liability that are not based on observable market data (unobservable inputs)

If inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

2.4 Functional and Presentation CurrencyThe Consolidated Financial Statements are presented in Sri Lankan Rupees which is the Group’s functional and presentation currency. All financial information presented in Sri Lankan Rupees has been rounded to the nearest thousand unless otherwise stated.

Monetary assets and liabilities denominated in foreign currencies have been translated into local currency as per the exchange rate at the reporting date while all non-monetary items are reported at the rate prevailing at the time transactions were affected.

2.5 Accounting Policies and Comparative InformationThe Accounting Policies applied by the Company are, unless otherwise stated, consistent with those used in the previous year. Previous year’s figures and phrases have been rearranged, wherever necessary, to conform to the current year’s presentation.

2.6 Materiality and AggregationEach material class of similar items is presented separately in the consolidated financial statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by LKAS 1: Presentation of Financial Statements.



Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

If share based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market based value of the replacement awards compared with the market based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

3.1.2 Non-controlling interests

For each business combination, the Group elects to measure any non-controlling interests in the acquiree either:

y At fair value; or

y At their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

The total profit and loss for the year of the Company and its subsidiaries included in consolidation, are shown in the consolidated Statement of Profit or Loss with the proportion of profit and loss after taxation pertaining to minority shareholders of subsidiaries being deducted as ‘Non-Controlling Interest’. All assets and liabilities of the Company and of its subsidiaries included in consolidation are shown in the consolidated Statement of Financial Position. The interest of minority shareholders of subsidiaries in the fair value of net assets of the Group are indicated separately in the consolidated Statement of Financial Position under the heading ‘Non-Controlling Interest’.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill

3.1.3 Subsidiaries

Subsidiaries are entities controlled by the Group. The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases.

Control over an investee

Specifically, the Group controls an investee if, and only if, the Group has:

y Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

y Exposure, or rights, to variable returns from its involvement with the investee

y The ability to use its power over the investee to affect its returns

Consolidation of entities in which the Group holds less than a majority of voting rights

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

y The contractual arrangement with the other vote holders of the investee;

y Rights arising from other contractual arrangements; and

y The Group’s voting rights and potential voting rights

The following companies, with equity control equal to or less than 50%, have been consolidated as subsidiaries based on above criteria.

Company Name Holding %

Marawila Resorts PLC 39.45

York Hotel (Kandy) Ltd. 39.62

Ceytra (Pvt) Ltd. 34.76

Kelani Valley Canneries Ltd. 48.89

Sunquick Lanka Properties (Private) Limited 28.22

The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date the control effectively commences until the date that control effectively ceases.

3.1.4 Investments in Associates and Joint Venture

An Associate is an entity in which the Group has significant influence, but no control over the financial and operating policies Significant influence is presumed to exist when the Group holds between 20 percent and 50 percent of the voting power of another entity.

Joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.


The Group determines significant influence or joint control by taking into account similar considerations necessary to determine control over subsidiaries.

The Group’s investments in associate and joint venture are accounted for using the equity method and are recognised initially at cost which includes the transaction cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually.

The statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

At each reporting date, the Group determines whether there is objective evidence that the investment in associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as ‘Share of profit of an associate and a joint venture’ in the income statement.

When the Group’s share of losses exceeds its interest in the associate, the carrying amount of that interest, including any long term investments, is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

The Group discontinues the use of the equity method from the date that it ceases to have significant influence over an associate or joint control over the joint venture and accounts for the investment in accordance with the Group’s accounting policy for financial instruments. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

There are no significant restrictions on the ability of the associate to transfer funds to the Group in the form of cash dividends or repayment of loans and advances. Details of the associates within the Group are provided in Note 17.2 to the financial statements and the details of the joint venture are provided in Note 17.3 to the Financial Statements.

3.1.5 Loss of control

On the loss of control, the Group de-recognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or Financial Assets Fair Value Through Other Comprehensive Income (FVTOCI)depending on the level of influence retained.

3.1.6 Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated Financial Statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

3.2. Changes in Accounting Policies The Group has adopted SLFRS 15 Revenue from Contracts with Customers and SLFRS 9 Financial Instruments from 1st April 2018. A number of other new standards are also effective from 1st April 2018 but they do not have a material effect on the Group’s Financial Statements.

Due to the transition methods chosen by the Group in applying these standards, comparative information throughout these Financial Statements has not been restated to reflect the requirements of the new standards.



The effect of initially applying these standards is mainly attributed to the followings:

- Changes in Classification of Financial Instruments.

- Impairment losses recognised on financial assets.

- Change of the Revenue Recognition.

3.2.1 SLFRS 15 Revenue from Contracts with Customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced LKAS 18 Revenue, LKAS 11 Construction Contracts and related interpretations. Under SLFRS 15 revenue from contracts with customers, an entity should recognize as revenue the amount that reflects the consideration to which the entity expects to be entitled in exchange for goods or services excluding amounts collected on behalf of third parties. The Group recognizes revenue when it transfers control over a product or service to a customer. Determining the timing of the transfer of control – at a point in time or over time – requires judgment.

3.2.1.1 Impact on the adoption of new SLFRS Standards as at 1st April 2018

The Group has applied SLFRS 15 using the cumulative transition effect method – i.e. by recognising the cumulative effect of initially applying SLFRS 15 as an adjustment to the opening balance of equity at 1st April 2018 and therefore the comparative information has not been restated and continues to be reported under LKAS 18. The details of accounting policies under LKAS 18 and SLFRS 15 are disclosed in Note 5 separately.

The effect of initially applying of SLFRS 15 is mainly attributed to recognition of revenue from FMCG product contracts with a right of return, slotting fees and allowances to distributors, reimbursement of vehicle hire, dealer incentives and settlement discounts.

The following table summarises the impacts of adopting SLFRS 15 on the Group’s statement of financial position as at 31st March 2018 and 2019 and its profit or loss and other comprehensive income for the year then ended 31st March 2018 and 2019 for each line item affected. There was no material impact on the Group’s statement of cash flows for the year ended 31st March 2019.

Impact on the statement of financial position;

Group 31st March 2019 31st March 2018

As at

As reported

Rs. 000’

SLFRS 15 Adjustments

Rs. 000

Amounts without

adopting SLFRS 15

Rs. 000

As reported

Rs. 000


Rs. 000

After adopting SLFRS 15

Rs. 000

Total non-current assets 10,808,244 - 10,808,244 8,308,176 - 8,308,176 Inventories 2,374,752 79,238 2,295,514 2,026,676 122,202 2,148,878 Trade and other receivables 4,294,255 - 4,294,255 4,479,372 - 4,479,372 Other current assets 1,096,053 - 1,096,053 1,748,825 - 1,748,825 Total assets 18,573,304 79,238 18,494,066 16,563,049 122,202 16,685,251

Total equity 5,022,075 - 5,022,075 3,686,478 - 3,686,478 Total non-current liabilities 4,814,961 - 4,814,961 3,084,613 - 3,084,613 Trade and other payables 2,932,068 79,238 2,852,830 2,559,633 122,202 2,681,835 Other current liabilities 5,804,200 - 5,804,200 7,232,325 - 7,232,325 Total liabilities 13,551,229 79,238 13,471,991 12,876,571 122,202 12,998,773 Total equity and liabilities 18,573,304 79,238 18,494,066 16,563,049 122,202 16,685,251



Impact on the consolidated statement of profit or loss and other comprehensive income;

For the year ended 31st March 2019 31st March 2018

Group

As reported

Rs. 000’


Rs. 000

Amounts without

adopting SLFRS 15

Rs. 000

As reported

Rs. 000


Rs. 000


Rs. 000

Revenue 17,659,156 (58,563) 17,717,719 18,479,195 (100,606) 18,378,589 Cost of sales (14,430,374) (42,964) (14,387,410) (15,101,896) - (15,101,896)Other income 316,571 - 316,571 638,586 - 638,586 Distribution expenses (1,070,961) 101,527 (1,172,488) (1,268,654) 100,606 (1,168,048)Others (3,358,672) - (3,358,672) (3,224,335) - (3,224,335)Profit for the year (884,280) - (884,280) (477,104) - (477,104)Total comprehensive income for the year 1,427,439 - 1,427,439 (528,221) - (528,221)

For the year ended 31st March 2019 31st March 2018

Company

As reported Rs. 000’


Rs. 000

Amounts without

adopting SLFRS 15

Rs. 000

As reported

Rs. 000


Rs. 000


Rs. 000

Revenue 3,229,414 (38,903) 3,268,317 4,204,150 (44,576) 4,159,574 Cost of sales (2,753,439) - (2,753,439) (3,471,902) - (3,471,902)Other income 258,604 - 258,604 452,592 - 452,592 Distribution expenses (370,680) 38,903 (409,583) (536,598) 44,576 (492,022)Others (929,089) - (929,089) (1,163,061) - (1,163,061)Profit for the year (565,190) - (565,190) (514,819) - (514,819)Total comprehensive income for the year 16,847 - 16,847 (533,683) - (533,683)

FMCG product contracts with a right of return (C.W Mackie PLC)

Under LKAS 18, revenue for these contracts was recognised when a reasonable estimate of the returns could be made, provided that all other criteria for revenue recognition were met. If a reasonable estimate could not be made, then revenue recognition was deferred until the return period lapsed or a reasonable estimate of returns could be made. Under SLFRS 15, revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.

Therefore, for those contracts for which the Group was unable to make a reasonable estimate of returns, revenue is recognised sooner under SLFRS 15 than under LKAS 18. The impact of these changes on items other than revenue is a decrease in the refund liability, which is included in trade and other payables. In addition, there is a new asset for the right to recover returned goods, which is presented as part of inventory.

Slotting fees and allowances to distributors/Vehicle Hire/Dealer Incentive/ Settlement Discount

Rent and electricity paid to customers in respect of allocation of space for product displaying, allowances paid to distributors to promote sales, Vehicle Hire, Dealer Incentive and Settlement Discount paid to dealers / distributors are reclassified from distribution expenses as a revenue deduction component in respect of contract with customers.


3.2.2 SLFRS 9 Financial Instruments

SLFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The standards replaces LKAS 39 Financial Instruments: Recognition and Measurement.

As a result of adoption of SLFRS 9, the Group has adopted consequential amendments to LKAS 1 Presentation of Financial Statements, which require impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Impairment losses on financial assets are presented under “other expenses “, similar to the presentation under LKAS 39, and not presented separate in the statement of profit or loss and OCI due to materially considerations.

Additionally, the Group has adopted consequential amendments to SLFRS 9 Financial Instruments, disclosures that are applied to disclosures for year ended 31st March 2019, but have not been generally applied to comparative information.

3.2.2.1 Classification and Measurement of Financial Assets and Financial Liabilities

SLFRS 9 contains three principal classification categories for financial assets; measured at amortised cost, FVOCI and FVTPL. The classification of financial assets under SLFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. SLFRS 9 eliminates the previous LKAS 39 categories of held to maturity, loans and receivables and available for sale.

SLFRS 9 largely retains the existing requirements in LKAS 39 for the classification and measurement of financial liabilities. The adoption of SLFRS 9 has no significant effect on the Group’s accounting policies related to financial liabilities.

The following table explains the original measurement categories under LKAS 39 and the new measurement categories under SLFRS 9 for each class of the Group’s financial assets and financial liabilities as at 1st April 2018.

The effect of adopting SLFRS 9 on the carrying amounts of financial assets as at 1st April 2018 relates solely to the new impairment requirements.

Financial Assets Original Classification under LKAS 39

New Classification under SLFRS 9

Other Non Current Financial Assets

AFS FVT - OCI - Equity Instruments

Trade and Other Receivables

Loans and Receivables

Amortised Cost

Amounts Due from Related Company


Amortised Cost

Loans Due from Related Party


Amortised Cost

Cash and Cash Equivalents


Amortised Cost

Other Current Financial Assets

FVTPL FVTPL - Equity Instruments

(i) Trade and Other Receivables that were classified as loans and receivables under LKAS 39 are now classified at amortised cost.

(ii) Amounts Due from Related Company that were classified as loans and receivables under LKAS 39 are now classified at amortised cost.

(iii) Cash and cash equivalents includes cash in hand, balances with banks and short term monetary investment with maturities less than 3 months. These were classified as loans and receivables under LKAS 39 and now as amortised cost.

(iv) Loans due from Related Companies that are classified as loans and other Receivables under LKAS 39 are now classified as amortised cost.

(v) Long term investments that were previously classified as available for sale financial assets are now classified as fair value through OCI. The Company intends to hold the assets to maturity to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. Based on the materiality ground, the Company has not recognized impairment for those balances.



The effect of adopting SLFRS 9 on the carrying amounts of Financial Assets as at 1st April 2018 is as follows.

Group



Original Carrying amount under

LKAS 39 Rs. 000

New Carrying amount under

SLFRS 9 Rs. 000

Trade and Other Receivables Loans and Receivables Amortised Cost 4,479,372 4,453,622


Loans and Receivables Amortised Cost 241,044 241,044

Cash and Cash Equivalents Loans and Receivables Amortised Cost 1,210,568 1,210,568

Financial assets measured at fair value through other comprehensive income

Quoted equity securities Available for sale Fair value through other comprehensive income

29,653 29,653

Unquoted equirt securities Available for sale Fair value through other comprehensive income

34,533 34,533

Financial assets measured at fair value through profit or loss

Quoted equity securities Fair value through profit or loss

Fair value through profit or loss

68,411 68,411

Company




LKAS 39 Rs. 000


SLFRS 9 Rs. 000

Trade and Other Receivables Loans and Receivables Amortised Cost 1,054,717 1,031,374


Loans and Receivables Amortised Cost 450,484 430,842

Cash and Cash Equivalents Loans and Receivables Amortised Cost 753,696 753,696

Financial assets measured at fair value through other comprehensive income

Quoted equity securities Available for sale Fair value through other comprehensive income

26,874 26,874

Unquoted equirt securities Available for sale Fair value through other comprehensive income

34,283 34,283

Financial assets measured at fair value through profit or loss

Quoted equity securities Fair value through profit or loss

Fair value through profit or loss

68,411 68,411


The effect of adopting SLFRS 9 on the carrying amounts of financial liabilities as at 1st April 2018 is as follows.

Financial Liabilities Original Classification under LKAS 39 New Classification under SLFRS 9

Trade and Other Payables Other Financial Liabilities measured at amortised cost

Other Financial Liabilities measured at amortised cost

Amounts due to Related Companies



Loans Due from Related Party Other Financial Liabilities measured at amortised cost


Bank Overdraft Other Financial Liabilities measured at amortised cost


Interest Bearing Borrowings Other Financial Liabilities measured at amortised cost


There were no changes to the classification of financial liabilities.

GroupFinancial Liabilities Original Classification

under LKAS 39New Classification under SLFRS 9


LKAS 39 Rs. 000


SLFRS 9 Rs. 000

Trade and Other Payable Other financial liabilities measured at amortised cost

Amortised Cost 2,559,633 2,559,633

Amounts Due to Related Company

Other financial liabilities measured at amortised cost

Amortised Cost 600,839 600,839

Interest Bearing Loans and Borrowings


Amortised Cost 7,741,662 7,741,662

Bank Overdrafts Other financial liabilities measured at amortised cost

Amortised Cost 1,401,975 1,401,975

CompanyFinancial Liabilities Original Classification

under LKAS 39New Classification under SLFRS 9


LKAS 39 Rs. 000


SLFRS 9 Rs. 000

Trade and Other Payable Other financial liabilities measured at amortised cost


Amounts Due to Related Company



Interest Bearing Loans and Borrowings


Amortised Cost 4,272,120 4,272,120

Bank Overdrafts Other financial liabilities measured at amortised cost


There were no changes of the carrying amounts of financial assets and financial liabilities under LKAS 39 to the carrying amounts under SLFRS 9 on transition to SLFRS 9 on 1st April 2018.



The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.- The determination of the business model within which a financial asset is held- The designation and revocation of previous designation of certain financial assets and financial liabilities as measured at FVTPL- The designation of certain investments in equity instruments not held for trading as FVTOCI

3.2.2.2 Impairment of Financial Assets

SLFRS 9 replaces the “incurred loss” model in LKAS 39 with an “Expected Credit Loss model”(ECL). The new impairment model applies to financial assets carried at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under SLFRS 9 credit losses are recognised earlier than under LKAS 39.

For assets in the scope of the SLFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile. The Company has determined that the application of SLFRS 9 impairment requirements at 1st April 2018 result in an allowance for impairment as follows

GroupThe following table summarises the impact, net of tax of transition to SLFRS 9 on the opening balance of reserves and retained earnings


Impact of adopting SLFRS 9 on the opening

balance (Rs.000)

Impairment allowance on expected credit loss

- Trade and other receivables 25,750

Impact as at 1st April 2018 25,750

CompanyThe following table summarises the impact, net of tax of transition to SLFRS 9 on the opening balance of reserves and retained earnings


Impact of adopting SLFRS 9 on the opening

balance (Rs.000)

Impairment allowance on expected credit loss

- Trade and other receivables 23,343

- Amounts due from related companies 19,642

Impact as at 1st April 2018 42,985

3.2.2.3 Transition

Changes in accounting policies resulting from the adoption of SLFRS 9 have been applied retrospectively, except as described below:

The Group has used an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of SLFRS 9 are adjusted in retained earnings as at 1st April 2018. Accordingly, the information presented for 2018 does not generally reflect the requirements of SLFRS 9, but rather those of LKAS 39.


The following table reconciles to the closing impairment allowance for financial assets under LKAS 39 to the opening ECL allowance determined under SLFRS 9 as at 1st April 2018.

Group LKAS 39 carrying amount at 31st

March 2018 Rs. 000

Re-measurementRs. 000

SLFRS 9 carrying amount at 1st April

2018 Rs. 000

Financial Assets

Amortised Cost

Trade and other receivables

Brought forward: Loans and receivables 4,479,372Re-measurement (Impairment) (25,750)Carried forward:Amortised cost 4,453,622Cash and cash equivalents

Brought forward: Loans and receivables 1,210,568Re-measurement -Carried forward:Amortised cost 1,210,568Amounts due from related companies

Brought forward: Loans and receivables 241,044Re-measurement -Carried forward:Amortised cost 241,044

Financial assets measured at fair value through other comprehensive incomeQuoted equity securities

Brought forward: Loans and receivables 29,653Re-measurement -Carried forward:Amortised cost 29,653Unquoted equity securities


Financial assets measured at fair value through profit or lossQuoted equity securities




Company LKAS 39 carrying amount at 31st

March 2018 Rs. 000

Re-measurementRs. 000

SLFRS 9 carrying amount at 1st April

2018 Rs. 000

Financial Assets

Amortised Cost


Brought forward: Loans and receivables 1,054,717Re-measurement (Impairment) (23,343)Carried forward:Amortised cost 1,031,374Cash and cash equivalents

Brought forward: Loans and receivables 753,696Re-measurement -Carried forward:Amortised cost 753,696Amounts due from related companies

Brought forward: Loans and receivables 450,484Re-measurement (19,642)Carried forward:Amortised cost 430,842

Financial assets measured at fair value through other comprehensive incomeQuoted equity securities

Brought forward: Loans and receivables 26,874Re-measurement -Carried forward:Amortised cost 26,874Unquoted equity securities


Financial assets measured at fair value through profit or lossQuoted equity securities



3.3 Foreign Currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at prevailing exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are re-translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are re-translated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

3.4 Financial Instruments

3.4.1 Recognition and Initial Measurement

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not a FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

3.4.2. Classification and Subsequent Measurement

3.4.2.1. Financial Assets

Policy applicable from 1st April 2018

On initial recognition, a financial asset is classified as measured at amortised cost, Fair Value through Other Comprehensive Income (FVOCI) or Fair Value through Profit or Loss (FVTPL).

Financial assets are not reclassified subsequently to their recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL;

- It is held within a business model whose objective is tohold assets to collect contractual cash flows; and

- Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL;

- It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

- Its contractual terms give rise on specified dates to cash flows that are solely payment of principal and interest on the principal amount outstanding.

- A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL;

- It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

- Its contractual terms give rise on specified dates to cash flows that are solely payment of principal and interest on the principal amount outstanding.

On the initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial assets that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

a) Business Model Assessment


The Group makes an assessment of the objectives of the business model in which a financial asset is held as a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes;

- The stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching


the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

- How the performance of the portfolio is evaluated and reported to the Group’s management.

- The risks that affect the performance of the business model (and the financial assets held within the business model) and how those risks are managed;

- How managers of business are compensated. eg: whether compensation is based on the fair value of assets managed or the contractual cash flows collected.

- The frequency, volume and timing of sales of financial assets in prior periods, the reason for such sale and expectation about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets.

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

3.4.2.2 Assessment Whether Contractual Cash Flows are Solely Payments of Principal and Interest


For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group Considers:

- Contingent events that would change the amount or timing of cash flows;

- Terms that may adjust the contractual coupon rate, including variable-rate features;

- Prepayment and extension features; and

- Terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features).

- A prepayment feature is consistent with the solely payments of principle and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract.

Financial assets at FVTPL

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

Financial assets at amortised cost

These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method an impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.


The Group classified its financial assets into one of the following categories.- Loans and Receivables;

- Held to Maturity;

- Available for Sale and

- At FVTPL, and within this category as;

- Held for Trading - Designated as at FVTPL - Derivative hedging instruments



a) Subsequent measurement and gains and losses:

Financial assets at FVTPL

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

Held-to-maturity Financial Assets

Measured at amortised cost using the effective interest method.

Available for sale Financial Assets

Measured at fair value and changes therein, other than impairment losses, interest income and foreign currency differences on debt instruments, were recognised in OCI and accumulated in the fair value reserve. When these assets were derecognised, the gain or loss accumulated in equity was reclassified to profit or loss.

3.4.2.3.Financial Liabilities

i) Classification, subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortised cost of FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

3.4.3 De-recognition

3.4.3.1 Financial Assets

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group enters in to transactions where by it transfers assets recognised in its Statements of Financial Position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

3.4.3.2 Financial Liabilities

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in

which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

3.4.4 Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

3.4.5 Other Payables

Other payables are stated at the amounts they are estimated to realise inclusive of provisions for impairment. Other payables includes amounts due to related companies and income tax payables.

3.4.6 Assets and Basis of their Valuation

Assets classified as Current Assets in the Statement of Financial Position are Cash, Bank balances and those which are expected to be realised in cash during the normal operating cycle of the Group’s business, or within one year from the reporting date, whichever is shorter. Assets other than current assets are those which the Group intends to hold beyond a period of one year from the reporting date.

3.5 Property, Plant and EquipmentProperty, Plant and Equipment are tangible items that are held for use in the production or supply of goods or services or for administrative purposes and are expected to be used during more than one period.

3.5.1 Recognition and Measurement

Property, Plant and Equipment are recognised, if it is probable that future economic benefits associated with the asset will flow to the Company and cost of the asset can be measured reliably.

Property, Plant & Equipment except Land are initially measured at its cost and subsequently at cost less accumulated depreciation and accumulated impairment losses.

At the time of transition from SLASs to SLFRSs/ LKASs, the Company has elected to recognise their land at deemed cost by applying the optional exemption included in the transitional provisions of SLFRS 1, “First time Adoption of Sri Lanka Accounting Standards”. Accordingly, previously recognised revalued amount has been


considered as deemed cost of the land as at 1st April 2011 and the cost model has been applied subsequently as per LKAS 16. However, since 31st March 2019 the Company has shifted from cost model to revaluation model as per LKAS 16. The change in accounting policy from cost model to revaluation model has not led for a retrospective restatement due to the exemption available in the paragraph 17 of LKAS 8 “Accounting Policies, Change in Accounting Estimates and Errors”. As per paragraph 17 of LKAS 8, the initial application of a policy to revalue assets in accordance with LKAS 16 “Property, Plant and Equipment” is a change in an accounting policy to be dealt with as a revaluation in accordance with LKAS 16, rather than in accordance with LKAS 8. LKAS 16 provides that when an item of property, Plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount at the date of revaluation.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing cost.Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When significant parts of an item of Property, Plant and Equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and Equipment.

3.5.2 Cost Model

The Group applies cost model to Property, Plant and Equipment except for lands and records at cost of purchase or construction together with any incidental expenses thereon, less accumulated depreciation and any accumulated impairment losses.

3.5.3 Revaluation Model

The Group applies the revaluation model for the entire class of lands. Such lands are carried at a revalued amount, being their fair value at the date of revaluation, less subsequent accumulated impairment losses. Land of the Group are revalued at once in every three years on a roll over basis to ensure that the carrying amounts do not differ materially from the fair values at the reporting date. On revaluation of an asset, any increase in the carrying amount is recognised in Other Comprehensive Income and accumulated in equity, under capital reserve or used to reverse a previous revaluation decrease relating to the same asset, which was charged to the Statement of Income. In this circumstance, the increase is recognised as income to the extent of the previous write down. Any decrease in the carrying amount is recognised as an expense in the Statement of Income or debited in the Other Comprehensive Income to the extent of any credit balance existing in the capital reserve in respect of that asset. The decrease recognised in other Comprehensive Income

reduces the amount accumulated in equity under capital reserves. Any balance remaining in the revaluation reserve in respect of an asset is transferred directly to retained earnings on retirement or disposal of the asset.

3.5.4 Gains and Losses on Disposal

Gains and losses on disposal of an item of Property, Plant and Equipment are determined by comparing the proceeds from disposal with the carrying amount of Property, Plant and Equipment, and are recognised net within “other income/other expenses” in Profit or Loss.

3.5.5 Subsequent Costs

The cost of replacing a part of an item of Property, Plant and Equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of Property, Plant and Equipment are recognised in profit or loss as incurred.

3.5.6 De-Recognition

The carrying amount of an item of Property, Plant and Equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the de-recognition of an item of Property, Plant and Equipment is included in Profit or Loss when the item is derecognised. When replacement costs are recognised in the carrying amount of an item of Property, Plant and Equipment, the remaining carrying amount of the replaced part is derecognised. Major inspection costs are capitalised. At each such capitalisation, the remaining carrying amount of the previous cost of inspections is derecognised.

3.5.7 Depreciation

Items of Property, Plant and Equipment are depreciated from the date they are available for use or, in respect of self-constructed assets, from the date that the asset is completed and ready for use.

Depreciation is calculated to write off the cost of items of Property, Plant and Equipment less their estimated residual values using the straight-line basis over their estimated useful lives. Depreciation is generally recognised in Profit or Loss, unless the amount is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.



The estimated useful lives for the current and comparative years are as follows:

Assets Years

Freehold Buildings 10-40

Plant, Machinery & Equipment 04-13 1/3

Motor Vehicles 04-05

Office Equipment 08-10

Furniture & Fittings 08-10

Computer Equipment 04-05

Linen, Cutlery & Crockery On replacement basis\ 4 Years

The useful life and residual value of assets are reviewed, and adjusted if required, at the end of each financial year.

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

3.5.8 Capital Work in Progress

Capital expenses incurred during the year which are not completed as at the reporting date are shown as capital work-in-progress, while the capital assets which have been completed during the year and put to use are transferred to Property, Plant and Equipment.

3.5.9 Finance Leases

Property, plant & equipment on finance leases, which effectively transfer to the Group substantially all the risk and benefits incidental to ownership of the leased items, are classified as leasehold assets under the property, plant and equipment and stated at an amount equal to the lower of their fair value and the present value of minimum lease payments at the inception of the lease, less the accumulated depreciation. Depreciation is made over the period the Group is expected to benefit from the use of the leased assets.

3.5.10 Operating Leases

Leases, where the lessor effectively retains substantially all of the risks and benefits of ownership over the term of the lease, are classified as operating leases. Lease payments are recognised as an expense in the Statement of Profit or Loss over the term of the lease and not recognised in the Statement of Financial Position.

3.6 Investment PropertyInvestment property is property held either to earn rental income or for capital appreciation or for both, but not held for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

The Group has chosen cost model to measure investment property and consequently investment property is measured at deemed cost less accumulated depreciation and any impairment losses. Depreciation is recognised on a straight line basis over the estimated useful life of the investment property.

The estimated useful life of investment property in the Group is as follows:

C.W. Mackie PLC - building: 40 years

Investment properties are derecognised when disposed of, or permanently withdrawn from use because no future economic benefits are expected. Any gains or losses on retirement or disposal are recognised in the year of retirement of disposal. Transfers are made to and from investment property only when there is a change in use in accordance with the criteria listed in LKAS 40-Investment Property.

Where group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the Consolidated Financial Statements, and accounted for in accordance with LKAS 16-Property, Plant and Equipment.

3.7 Borrowing CostsBorrowing Costs that are directly attributable to acquisition, construction of products of a qualifying asset, which takes a substantial period of time to get ready for its intended use or sale, are capitalised as a part of the asset.

Borrowing Costs that are not capitalised are recognised as expenses in the period in which they are incurred and charged to the Statement of Comprehensive Income.

The amounts of the Borrowing Costs which are eligible for capitalisation determined in accordance with LKAS 23 – Borrowing Costs.


3.8 Intangible Assets

Goodwill

Goodwill that arises on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each Cash Generating Unit.(or Group of Cash Generating Unit) to which the goodwill relates. When the recoverable amount of the Cash Generating Unit less than it’s carrying value, an impairment loss is recognised. Impairment losses relating to goodwill cannot be revised in future periods.

3.9. InventoriesRaw materials, finished goods and work in progress of the group are valued at the lower of cost on a weighted average basis and net realisable value. Provision is made for obsolete, slow moving and defective inventories where necessary.

The cost includes expenditure incurred in acquiring the inventories and bringing them to their existing condition. In the case of manufactured inventories, cost includes raw material cost and packing material cost.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.

3.10 Derecognition of Financial AssetsA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is de-recognised when the rights to receive cash flows from the asset have expired. The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement and either

(a) the Group has transferred substantially all the risks and rewards of the asset, or

(b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it.

In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

3.11 Impairment

3.11.1 Non-derivative financial assets


a) Financial Instruments and Contract Assets

The Group recognises loss allowances for ECLs (Expected Credit Loss) on:

- Debt investments measured at FVOCI and contract Assets

- Financial assets measured at amortised cost.

The Group measures loss allowances at an amount equal to lifetime ECLs, except for the bank balances for which credit risk has not increased significantly since initial recognition which are measured at 12 month ECLs.

Loss allowance for trade receivables are always measured at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward-looking information.

The Company considers a financial asset to be in default when:

- The debtor is unlikely to pay its credit obligation to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or

- The financial asset is more than 365 days past due.

- The Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of “investment grade”.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.



b) Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e, the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

c) Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets carried at amortised cost are creditimpaired. A financial asset is “credit impaired” when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset occurred.

Evidence that a financial asset is credit-impaired includes the following observable data;

- Significant financial difficulty of the borrower; or the issuer

- A breach of contract such as default or being more than 365 been past due.

- The restructuring of a loan advance by the group on terms that the group would not consider otherwise.

- It is probable that the borrower will enter bankruptcy or other financial reorganisation; or

- The disappearance of an active market for a security because of financial difficulties.

d) Presentation of allowance for ECL in the statement of financial position

Loss allowance for financial assets measured at amortised cost is deducted from the gross carrying amount of the assets. For debt Securities at Fair Value Through Other Comprehensive Income. The Loss allowance is charged to Profit and Loss and is recognised in Other Compressive Income.

e) Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. For Individual customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the written off. However, Financial Assets that are written off could still be subject to enforcement activities in order to comply with the Group procedures for recovery of amount due.

Policy applicable before 1st April 2018

Financial assets not classified as FVTPL were assessed at each reporting date to determine whether there was objective evidence of impairment.

Objective evidence that financial assets were impaired included:

- Default or delinquency by a debtor;

- Indication that a debtor or issuer would enter bankruptcy;

- Adverse changes in the payment status or borrowers or issuers;

- Restructuring of an amount due to the group on terms that the Group would not consider otherwise.

- The disappearance of an active market for a security because of financial difficulties: or

- Observable data indicating that there was a measurable decrease in the expected cash flows from financial assets.

For an investment in an equity instrument, objective evidence of impairment included a significant or prolonged decline in its fair value below its cost. The Company considered a decline of 20% to be significant and a period of nine months to be prolonged.

Financial Assets Measured at Amortised Cost

The Group considered evidence of impairment for these assets at both individual asset level and a collective level. All individually significant assets were individually assessed for impairment. Those found not to be impaired were then collectively assessed for any impairment that had been incurred but not yet individually identified. Assets that were not individually significant were collectively assessed for impairment. Collective assessment was carried out by grouping together assets with similar risk characteristics. In assessing collective impairment, the Group used historical information on the timing of recoveries and the amount of loss incurred, and made an adjustment if current economic and credit conditions were such that the actual losses were likely to be greater or lesser than suggested by historical trends.

An impairment loss was calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses were recognised in profit or loss and reflected in an allowance account. When the Group considered that there were no realistic prospects of recovery of the asset, the relevant amounts were written off. If the amount of impairment loss subsequently decreased and the decrease was related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss was reversed through profit or loss.


Available-for Sale Financial Assets

Impairment losses on available-for-sale financial assets were recognized by reclassifying the losses accumulated in the fair value reserve to profit or loss. The amount reclassified was the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognised in profit or loss. If the fair value of an impaired available-for-sale debt security subsequently increased and the increase was related objectively to an event occurring after the impairment loss was recognised, then the impairment loss was reversed through profit or loss. Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-forsale were not reversed through profit or loss.

3.11.2 Non-Financial Assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or cash generating unit (CGU) exceeds its recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

3.12 Cash and Cash EquivalentsCash and cash equivalents comprise of cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short term commitments.

3.13 Assets Held-for-SaleBefore the classification as held-for-sale, non-current assets and liabilities in the disposal group are measured in accordance with relevant SLFRSs. Non-current assets and disposal groups classified as held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal

groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets are classified as held for distribution when the Company/Group committed to distribute the assets or disposal group to its owners.

Impairment losses on initial classification as held-for-sale and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.

3.14 Stated Capital

Ordinary shares

Ordinary shares are classified as equity. As per the Companies Act No. 07 of 2007, section 58 (1), stated capital in relation to a Company means the total of all amounts received by the Company or due and payable to the Company in respect of the issue of shares and in respect of call in arrears.

Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

3.15 Employee Benefits

3.15.1 Short-Term Employee Benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

3.15.2 Defined Contribution Plan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in Profit or Loss in the periods during which related services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.



(a) Employees’ Provident Fund

The Company and employees contribute 12-15% and 8-10% respectively on the salary of each employee to the Employees’ Provident Fund.

(b) Employees’ Trust Fund

The Group contributes 3% of the salary of each employee to the Employees’ Trust Fund. The total amount recognised as an expense of the Group for contribution to ETF is disclosed in the notes to Financial Statements.

3.15.3 Defined Benefit Plan – Gratuity

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted.

The defined benefit obligation for the Company and Group are based on actuarial valuations. An actuarial valuation was carried out by a professionally qualified firm of actuaries as recommended by LKAS 19 – ‘Employee Benefits’. The valuation method used by the actuary is “Projected Credit Unit method”. When the calculation results in a benefit to the Company, the recognised asset is limited to the total of any unrecognised past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the company. An economic benefit is available to the Company if it is realisable during the life of the plan, or on settlement of the plan liabilities. When the benefits of a plan are improved, the portion of the increased benefit relates to past service by employees is recognised in Profit or Loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in Profit or Loss. Actuarial gain/losses for the period are recognised fully in the statement of Other Comprehensive Income.

However, according to the Payment of Gratuity Act No. 12 of 1983, the liability for the gratuity payment to an employee arises only on the completion of 5 years of continued service with the Company.

Lankem Ceylon PLC and C.W. Mackie PLC have obtained insurance policies to meet the retiring gratuity payments to its employees.

3.16 Provisions, Contingent Assets and Contingent LiabilitiesProvisions are made for all obligations existing as at the date of Statement of Financial Position when it is probable that such an obligation will result in an outflow of resources and a reliable estimate can be made of the quantum of the outflow.

All contingent liabilities are disclosed as a note to the Financial Statements unless the outflow of resources is remote.

Contingent assets are disclosed in the notes, where inflow of economic benefit is probable.

3.17 Revenue

3.17.1 Revenue


Revenue will be recognised upon satisfaction of performance obligation. The Group expects the revenue recognition to occur at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods and service.

A. Revenue Streams

The Group generates revenue primarily from sale of goods under revenue from contracts with customers. The rental income and repair income are the other sources of income included under revenue.

B. Disaggregation of Revenue from

Contract with Customers Revenue from contract with customers (including revenue related to a discontinuing operation) is disaggregated by primary geographical market, major products and service lines and timing of revenue recognition under Note 5.

C. Contract Balances

Contract Assets

Cost to obtain contract

The Company capitalises incremental costs to obtain a contract with a customer for the assets with more than one year amortisation period and if it expects to recover those costs. The costs that will be incurred regardless of whether the contract is obtained – including costs that are incremental to trying to obtain a contract, are expensed as they are incurred. The cost to obtain contract will be amortised over the contract period on a systematic basis.


Cost of fulfilling a contract

The Company capitalises the costs incurred in fulfilling a contract with a customer for which are not in the scope of other guidance and only if the fulfillment costs meet the following criteria:

y relate directly to an existing contract or specific anticipated contract;

y generate or enhance resources that will be used to satisfy performance obligations in the future; and

y are expected to be recovered.

The cost of fulfilling a contract will be amortised over the contract period on a systematic basis.

Contract Liabilities

The Company recognise a contract liability for the deferred revenue on the extended warranty provided for the customers.The contract liability shall be realized to revenue on the basis of utilizing the warranty by the customers or on a systematic basis accordingly.

Performance Obligations and Revenue Recognition Policies Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it transfers control over a good or services to a contract.

The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies


Type of Product Nature and timing of performance obligations including significant payment terms

Revenue recognition under SLFRS 15 (Aplicable from 1st April 2018)

Revenue recognition under LKAS 18 (Applicable before 1st April 2018)

(a) Sale of Goods Customers obtain control of products when the goods are delivered to and have been accepted at their premises. Invoices are generated at that point in time. Invoices are usually payable within 30/60/90 days based on the product category

Customers obtain control of products when the goods are delivered to and have been accepted at their premises. Invoices are generated at that point in time. Invoices are usually payable within 30/60/90 days based on the product category

Revenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to the buyer with the group retaining neither a continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold.

(b) Rendering of Services

Revenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

(c) Revenue from Construction Contracts

Revenue from construction contracts are calculated on the basis of the percentage completion method. Revenue is accounted proportionately and accrued accordingly on the jobs which are substantially completed as at the date of Statement of Financial Position. The stage of completion is assessed by reference to the surveys of work performed.

(d) Revenue from Hotel Services

Apartment revenue is recognised on the rooms occupied on a daily basis and food and beverage and other hotel related sales are recognised at the point of sale.

(e) Dividend Income

Dividend income is recognised when the shareholders’ right to receive such dividend is established.

(f) Finance Income

Finance income comprises interest income on funds invested (including available-for-sale financial assets), gains on the disposal of available-for-sale financial assets and fair value gains on financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.


3.17.2 Other Sources of Revenue

Dividend Income

Dividend Income is recognised in the Statement of Profit or Loss on the date when the entities right to receive payment is established.

Finance Income

Finance income comprises interest income on funds invested (including available-for-sale financial assets), gains on the disposal of available-for-sale financial assets and Fair Value Gains on Financial Assets at fair value through Profit or Loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Other Income - Other income recognised based on the actual basis

Gains and losses of a revenue nature on the disposal of Property, Plant and Equipment and other non-current assets are recognised by comparing the net sales proceeds with the carrying amount of the corresponding asset and are recognised net within ‘other income’ in the Statement of Profit or Loss.

3.18 Government Grants

3.18.1 Capital nature grants and subsidies

Grants and subsidies are credited to the Statement of Profit or Loss over the periods necessary to match them with related costs which they are intended to be compensated on a systematic basis. Grants related to assets, including non-monetary grants at fair value is deferred in the Statement of Financial Position and credited to the Statement of Profit or Loss over useful life of the related assets. Grants related to income are recognised in the Statement of Profit and Loss in the period in which it is receivable.

3.18.2 Revenue nature grants and subsidies

Grants and subsidies that compensate the Group for expenses incurred are recognised as revenue in the Statement of Profit or Loss on a systematic basis in the period in which the expenses are recognised. Grants that compensate the Group for the cost of an asset are recognised in the Statement of Profit or Loss over the useful life of the related assets.

3.19 ExpensesAll expenditure incurred in running the business and in maintaining the Property, Plant and Equipment in a state of efficiency has been charged to Statement of Comprehensive Income in arriving at the profit/(loss) for the year. Expenditure incurred for the purpose of acquiring and extending or improving assets of a permanent nature by means of which to carry on the business or for the purpose of increasing the earning capacity of the business has been treated as capital expenditure.

3.19.1 Operating lease payments

Where the Company has the use of assets under operating leases, payments made under the leases are recognised in the Statement of Profit or Loss on a straight line basis over the term of the lease. Lease incentives received are recognised in the Statement of Profit or Loss as an integral part of the total lease expense over the term of the lease. Contingent rentals are charged to the Statement of Profit or Loss in the accounting period in which they are incurred.

3.19.2 Finance costs

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and losses on disposal ofFVTOCI financial assets , fair value losses on financial assets measured at fair value through profit or loss and impairment losses recognised on financial assets (other than trade receivables).

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

3.20 TaxationIncome tax expense comprises current and deferred tax. Income tax is recognised in the Statement of Profit or Loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

3.20.1 Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates and tax laws enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Current income tax relating to items recognised directly in equity is recognized in equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate


3.20.2 Deferred tax

Deferred Tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The following temporary differences are not provided for: goodwill not deductible for tax purposes. the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

The principal temporary differences arise from depreciation on Property, Plant and Equipment; tax losses carried forward, impairment of trade and other receivables and provisions for defined benefit obligations. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred Tax Assets are reviewed at reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred Tax Assets and Liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

3.21 Earnings per ShareThe Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

3.22 Statement of Cash FlowThe Cash Flow Statement has been prepared using ‘indirect method’. Interests paid are classified as operating cash flows while dividends paid are classified as financing cash flows. Interests and dividends received are classified as investing cash flows for the purpose of presentation of Cash Flow Statement.

3.23 Segmental InformationAn operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s CEO to make decisions About resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

3.24 Events Occurring After the Reporting DateAll material, events after the reporting date have been considered and where appropriate adjustments or disclosures have been made in respective notes to the Financial Statements.

3.25 Comparative FiguresWhere necessary, the comparative figures have been re-classified to conform to the current year’s presentation.

3.26 Capital Commitments and ContingenciesContingencies are possible assets or obligations that arise from a past event and would be confirmed only on the occurrence or non-occurrence of uncertain future events, which are beyond the Group’s control. Contingent liabilities are disclosed in Note 32 to the Financial Statements. Commitments are disclosed in Note 31 to the Consolidated Financial Statements.

3.27 Related Party TransactionsDisclosures have been made in respect of the transactions between parties who are defined as related parties as per Sri Lanka Accounting Standards No. 24 – Related Party Disclosures.

3.28 Financial Risk Management PoliciesThe Group’s principal financial liabilities comprise of loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds available-for-sale investments and enters into derivative transactions.



The Group is exposed to market risk, credit risk and liquidity risk. The Group’s Senior Management monitors these risks. The Group’s Senior Management is supported by an audit committee that advises on financial risks and the appropriate financial risk governance framework for the Group. The Audit Committee provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite.

4. NEW ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE AS AT THE REPORTING DATE Following new standard has been issued but not yet effective as at the reporting date and has not been applied in preparing these Financial Statements. The extent of the impact of this standard to the Consolidated Financial Statements has not been determined as at 31st March 2019. It is not expected to have a significant impact on the Group’s Financial Statements.

4.1. SLFRS 16 – LeasesSLFRS 16 sets out the principles for the recognition, measurement, presentation and disclosures of leases for both parties to a lease contract. SLFRS 16 is effective for annual reporting period beginning on or after 1st January 2019, with early adoption permitted.

SLFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognised a right-of use asset representing its right to use the underlying assets and lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases.

SLFRS 16, replaces existing leasing guidance, including LKAS 17 lease, IFRIC 4 Determining whether as arrangement contains a lease, SIC -15 Operating leases – Incentives and SIC-27 Evaluating the Substance of transactions involving the legal form of a lease.

The Group is in the process of assessing the potential impact on its Consolidated Financial Statements resulting from the application of SLFRS 16.


5. REVENUE


For the Year Ended 31st March 2019 Rs. ’000

2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

5.1 Revenue Streams

Revenue from contracts with customersSale of Goods 15,962,814 16,924,039 3,229,414 4,204,150Rendering of Services 1,696,342 1,555,156 - -

17,659,156 18,479,195 3,229,414 4,204,150

5.2 Business Segment Analysis of RevenueSegmentation has been determined based on the operating activities of the companies or the sector, where multiple activities fall within one company or sector has been based on the core activities of that particular sector.

Trading Consumer Products – Manufacturing, Selling and Distribution of Consumer ProductsTrading Industrial Products – Manufacturing, Selling and Distribution of Industrial ProductsLeisure – Owning and Operation of Resort HotelsOthers – Special Projects and Other Services



2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

5.3 Segment RevenueTrading - Consumer Products 6,735,093 6,968,466 71,648 112,540

Trading - Industrial Products 9,599,764 10,296,351 3,157,766 4,091,610

Leisure 1,700,969 1,555,835 - -

18,035,826 18,820,652 3,229,414 4,204,150

Less: Inter-Segment Revenue (376,670) (341,457) - -

17,659,156 18,479,195 3,229,414 4,204,150



2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

5.4 Timing of Revenue RecognitionProducts and services trasferred at a point in time 17,659,156 18,479,195 3,229,414 4,204,150Products and services trasferred over time - - - -

17,659,156 18,479,195 3,229,414 4,204,150

Operating Profit Profit/(Loss) before Tax


2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

5.5 Segment Profit – ConsolidatedConsumer Products 88,942 101,653 (48,882) (99,022)Industrial Products 183,150 674,957 (808,270) (179,770)Leisure 270,373 200,991 120,899 91,460 Others 46,769 9,039 (313,703) (161,823)

589,234 986,640 (1,049,956) (349,155)



5.6 Assets and Liabilities

Total Assets Total Liabilities

As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Trading - Consumer Products 2,090,717 2,180,056 1,538,346 1,683,142

Trading - Industrial Products 10,696,316 9,912,476 9,334,488 8,871,920

Leisure 5,481,375 4,043,106 1,866,625 1,580,398

Others 304,896 427,411 811,770 741,111

18,573,304 16,563,049 13,551,229 12,876,571

Additions to Property, Plant and Equipment, Depreciation and Amortisation.

Additions to Property Plant & Equipment

Depreciation/ Amortisation and Impairment

As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Trading – Consumer Products 47,391 34,673 45,063 51,810

Trading – Industrial Products 152,668 280,775 244,665 290,075

Leisure 86,128 64,039 130,019 146,358

Others - 19,520 602 234

286,187 399,007 420,349 488,477

6. OTHER INCOME



2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

Profit on Disposal of Property, Plant and Equipment 172,881 450,391 141,435 284,652

Dividend Income - Quoted Companies 1,036 2,692 61,024 73,405

- Unquoted 7,498 - 37,597 3,618

Creditors no longer payable written back 14,545 3,576 6,292 2,538

Amortisation of Grants and Subsidies 2,823 2,823 - -

Commission income 412 173 - -

Gain on disposal of AFS and FVTPL Investments - 20,020 - 45,239

Reversal of impairment loss on related party receivable 197 30,700 197 31,741

Reversal of impairment loss on trade receivable 1,197 1,371 - -

Rent Income 104,588 94,390 - -

Sundry Income 11,394 32,450 12,059 11,399

316,571 638,586 258,604 452,592


7. OTHER EXPENSES



2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

Provision for obsolete and slow moving inventory 17,654 - - -

Loss on disposal of Investments - - 3,289 -

Provision for Investment in Subsidiaries - - 79,431 39,759

Provision of Fair Value through OCI/AFS Investments - 3,175 - 3,175

Provision for Impairment of Investment in Associates - - 31,101 -

Provision for Impairment of Amounts due from Related Parties - - 25,605 45,042

Sundry Expenses 84,285 37,289 30,256 37,289

101,939 40,464 170,517 125,265

8. NET FINANCE COSTS



2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

(A) Finance Income

Interest Income (53,983) (17,502) (1,754) (4,443)

Net change in fair value of financial assets at fair value through profit or loss: - (69,283) - (69,283)

Interest from Related Companies (20,881) (27,842) (67,501) (62,033)

Commission on Corporate Guarantee (7,842) (10,318) (22,959) (27,532)

Foreign Exchange Gain (25,479) (62,359) (9,660) (42,839)

Total Finance Income (108,185) (187,304) (101,874) (206,130)

(B) Finance Costs

Interest on Term Loans 931,502 787,791 543,880 605,232

Interest on Overdraft and Trust Receipt Loans 329,969 400,838 191,244 227,173

Interest on Finance Lease Obligations 201 1,354 - -

Other Interest 72,051 190,851 31,414 78,537

Foreign Exchange Loss 105,062 23,966 - -

Net change in fair value of financial assets at fair value through profit or loss: 20,728 - 20,728 -

Total Finance Costs 1,459,513 1,404,800 787,266 910,942

Net Finance Costs 1,351,328 1,217,496 685,392 704,812



9. LOSS BEFORE TAX Is stated after charging all expenses including the following:



2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

Depreciation /Amortisation / Impairment

Property, Plant and Equipment 420,349 488,477 66,536 93,097

Investment Properties 36,719 6,040 - -

Auditor’s Remuneration

KPMG 10,547 9,754 2,700 2,575

Other Auditors 5,601 2,891 - -

Non-Audit Services

KPMG 2,049 1,050 - 733

Other Auditors 1,454 3,002 1,454 1,454

Salaries and Wages 1,215,518 1,341,260 549,506 646,412

Defined Benefit Plan Cost - Retiring Gratuity 55,874 46,106 23,985 16,514

Defined Contribution Plan Cost - EPF and ETF 137,589 153,515 58,479 66,855

Managing Agent Fees 25,883 21,999 - -

Provision for Impairment of Trade Receivables 38,810 30,620 21,341 52,981

Provision for Impairment of Obsolete Inventories 35,954 2,684 16,455 34,562

Donations 2,335 1,035 - -

10. INCOME TAX EXPENSE / (REVERSAL)



2018 Rs. ’000

2019 Rs. ’000

2018 Rs. ’000

Current Income Tax Expense (Note 10.1)

Taxation on Profit for the Year 142,408 149,330 - 15,414

Under / (Over) Provision on Taxation in respect of previous year 20,036 (2,719) - -

162,444 146,611 - 15,414

Deferred Tax Expense

Deferred Tax recognized through Profit or Loss (Note 26) (328,120) (18,662) (240,483) (61,709)

(165,676) 127,949 (240,483) (46,295)


10.1 Current Income Tax ExpenseReconciliation of Accounting Loss to Income Tax Expense


For the Year Ended 31st March 2019 Rs.’000

2018 Rs.’000

2019 Rs.’000

2018 Rs.’000

Accounting Loss before Taxation (1,049,956) (349,155) (805,672) (561,114)

Intra-Group Adjustments 337,062 105,098 - -

(712,894) (244,057) (805,672) (561,114)

Aggregate Disallowable Expenses 1,548,032 788,537 1,005,137 49,592

Aggregate Allowable Expenses (570,598) (591,967) (56,451) (128,120)

Tax Exempt (Income)/Loss (18,951) (166,212) - -

Income not part of Assessable Income (337,016) (525,706) (309,609) (455,684)

(91,427) (739,405) (166,595) (1,095,326)

Statutory Loss from Business (Note 10.2) 713,633 1,303,774 166,596 1,095,326

Statutory Profit from Business 622,206 564,369 - -

Other Sources of Income 133,674 140,849 69,553 89,564

Tax Losses utilized during the year (232,600) (59,549) (69,553) (31,348)

Qualifying Payments utilized during the year (22,050) (26,587) - (3,168)

Taxable Income 501,230 619,082 - 55,048

Income Tax @ 28% 117,556 112,349 - 15,414

Income Tax @ 14% 24,352 - - -

Income Tax @ 12% - 36,981 - -

Income Tax @ 10% 500 - - -

Taxation on Profit for the Year 142,408 149,330 - 15,414

10.2 Reconciliation of Accumulated Tax Losses


For the Year Ended 31st March 2019 Rs.’000

2018 Rs.’000

2019 Rs.’000

2018 Rs.’000

Balance at the beginning of the year 4,954,342 3,557,515 2,804,657 1,733,871

Adjustments in relation to previous year 25,016 152,602 (8,317) 6,808

Tax Loss utilized during the year (232,600) (59,549) (69,553) (31,348)

Tax Loss for the year 713,633 1,303,774 166,596 1,095,326

Balance at the end of the year 5,460,391 4,954,342 2,893,383 2,804,657



10.3 Corporate income taxes of the companies in the Group are computed in accordance with the Inland Revenue Act No. 24 of 2017.

Lankem Ceylon PLC and other Companies within the Group, excluding those which are enjoying a tax holiday or concessionary rate of taxation as referred to below, are liable to income tax at 28%.

10.4 Lankem Paint Ltd., Lankem Chemicals Ltd. Lankem Research Ltd., Lankem Consumer Products Ltd., Lankem Export Ltd., Nature’s Link Ltd., Sun Agro Farms Ltd., Sun Agro Food Ltd., Lankem Technology Services Ltd., Associated Farms (Pvt) Ltd., and Lankem Agrochemicals Ltd. were non-operative during the year.

10.5 Sigiriya Village Hotels PLC,Marawila Resorts PLC, Galle Fort Hotel (Pvt) Ltd., Beruwala Resorts PLC, Lakcraft , Sherwood holidays are liable for taxation at 14% on the profits and income from activities relating to operating of hotels and liable for taxation at 28% on other income in accordance with the provision of Inland Revenue Act. No. 24 of 2017.

10.6 In accordance with the agreement entered into with the Board of Investments of Sri Lanka under Section 17 of the G.C.E.C. Law No.4 of 1978, profits of York Hotels (Kandy) Ltd. are exempted from income tax for a period of ten years from the year in which the Company commences to make profits or within five years from the year the company commenced commercial operations, which ever is earlier. The company is also entitled to a concessionary rate of tax at 2% of its turnover for 15 years immediately after the expiry of the said 10 years tax holiday. Other income is liable to income tax at 28%.

However, Board of Investment has given a notice of cancellation and termination of all rights, privileges and benefits conferred on the enterprise under the conduct and operation of the project with effect from 23rd November 2002.

10.7 C. W. Mackie PLC and its subsidiaries, except Ceymac Rubber Company Limited, are liable for income tax at the rate of 28% on taxable profits in accordance with the provisions of Inland Revenue Act No. 24 of 2017. Ceymac Rubber Company Limited is liable for income tax at the concessionary rate of 14% under predominary concept on export activities and same rate will be applicable for entire taxable income as a single tax rate.

10.8 Changes Applicable to the Group under Inland Revenue Act No. 24 of 2017

10.8.1 Deferred tax expense on companies resident in Sri Lanka are calculated based on the tax rates specified in the Inland Revenue Act No. 24 of 2017, which are expected to be applied to the temporary differences when they reverse. As per

provisions of Inland Revenue Act No. 24 of 2017, deferred tax is recognised on the revaluation surplus on freehold land.

10.8.2 Revaluation surplus on freehold land As per Section 6 and Chapter IV of the Inland Revenue Act No. 24 of 2017, free hold lands used for business or investment purpose would be liable to tax at the time of realisation. Accordingly, deferred tax is recognised on the revaluation surplus of freehold lands which are treated as capital assets used in the business for tax purpose.

Freehold lands which are treated as investment assets for tax purposes would not be considered for deferred tax, since the Act requires deemed cost of the asset to be equal to market value as at 30th September 2017.

10.8.3. Tax loss carried forward

As per the Gazzette notification issued in relation to the transitional provisions, any unclaimed losses as at 31st March 2018, is deemed to be a loss incurred for the year of assessment commencing on or after April 1, 2018 and shall be carried forward up to 6 years. Accordingly the Group has evaluated the recoverability of unclaimed losses through taxable profit forecasts and deferred tax assets have been recognised.

10.8.4. Financial Cost Carried Forward

As per the Subsection (3) of Section 18 of the Inland Revenue Act No. 24 of 2017, financial cost for which a deduction is denied as a result of Subsection (1) of the same section, may be carried forward and treated as incurred during any of following six years of assessment, only to the extent of any unused limitation in Subsection (2) of the same section for the year. Accordingly, the group has evaluated the recoverability of unclaimed financial costs and assets have been recognized.

10.9 Deferred Taxationi Deferred tax has been computed by using the tax rate of 28%

for the Company and subsidiaries which are liable for income tax at the standard rate for the assessment year 2018/19. The subsidiaries which are liable for income tax at reduced rates (below the standard rate) for the assessment year 2018/19 have computed the deferred tax at the tax rate of 14%.

ii No provision has been made for deferred tax in the financial statements of York Hotels (Kandy) Ltd. as no material temporary differences have arisen during the year which are expected to reverse in the future.


iii No deferred tax assets have been recognised in the financial statements of Lankem Ceylon PLC and subsidiaries, namely SunAgro Farms Ltd., Lankem Exports (Pvt) Ltd., Lankem Consumer Products Ltd., Lankem Research Ltd., Lankem Paints Ltd., SunAgro Foods Ltd., Colombo Fort Hotels Ltd, Kelani Velli Canneries Ltd, Ceytra Limited, Lankem Chemicals Ltd., Lankem Technology Services (Pvt) Ltd., Associated Farms Ltd. and Ceymac Rubber Company Limited because it is not probable that future taxable profit will be available against which these companies can utilise the benefit details are given below:

As at 31.03.2019 31.03.2018

Temporary DifferencesRs. Million

Deffered TaxAsset

Rs. Million

Temporary DifferencesRs. Million

Deffered TaxAsset

Rs. Million

SunAgro Farms Ltd. 58.9 16.5 59.0 16.5

Lankem Exports (Pvt) Ltd. 31.1 8.7 31.1 8.7

Lankem Consumer Products Ltd. 192.5 53.9 192.4 53.9

Lankem Research Ltd. 13.3 1.6 12.7 1.5

Lankem Paints Ltd. 90.2 25.3 91.2 25.5

Lankem Chemicals Ltd. 2.7 0.8 2.6 0.8

SunAgro Foods Ltd. 355.6 99.6 305.1 85.4

Colombo Fort Hotels Ltd. 4.3 1.2 17.2 4.8

Lankem Ceylon PLC 1,769.7 495.5 2,196.9 618.6

Kelani Velley Canneries Ltd. 259.2 72.5 229.1 64.1

Ceytra (Private) Limited 45.5 12.7 53.1 3.6

Ceymac Rubber Company Limited 22.3 3.1 - -

Lankem Technology Services (Pvt) Ltd. 0.3 0.1 0.3 0.1

Associated Farms Ltd. 21.2 5.9 21.1 5.9

11. BASIC EARNINGS / (LOSS) PER SHAREBasic Earnings / (Loss) per share is based on the profit / (Loss) for the year attributable to owners of the Company divided by weighted average number of ordinary shares in issue during the year.


For the Year Ended 31st March 2019 2018 2019 2018

Profit / (Loss) attributable to Equity Holders of the Company (Rs.'000) (982,564) (583,357) (565,190) (514,819)

Weighted Average Number of Ordinary Shareholders (No.'000) 33,853 22,921 33,853 22,921

Basic Earnings / (Loss) per Share (Rs.) (29.02) (25.45) (16.70) (22.46)



12. PROPERTY, PLANT & EQUIPMENT

12.1 Consolidated

Balance As at

01.04.2018

Rs. ’000

Transfers/ Adjustments

Rs. ‘000

Revaluation during

the Year

Rs. ‘000

Additions during

the Year

Rs. ‘000

ImpairmentLosses for the Year

Rs. ‘000

Disposals during

the Year

Rs. ‘000

Asset Held For Sale

Rs. ‘000

Balance As at

31.03.2019

Rs.’000

Cost/Deemed Cost

Freehold

Land 2,276,331 - 2,924,209 193 - (52,198) (7,365) 5,141,170

Buildings 3,056,727 (31,212) 87,753 54,532 - (59,638) - 3,108,162

Land Development Cost 9,404 - - - - - - 9,404

Plant & Machinery 2,120,457 - - 116,246 - (34,809) - 2,201,894

Motor Vehicles 479,139 - - 32,841 - (73,956) - 438,024

Furniture and Fittings 508,626 489 - 36,857 - (5,683) - 540,289

Office Equipment 489,546 1,066 - 35,676 - (7,226) - 519,062

Linen & Soft Furnishings 133,595 - - 9,842 - (1,057) - 142,380

9,073,825 (29,657) 3,011,962 286,187 - (234,567) (7,365) 12,100,385

Leasehold

Motor Vehicles 6,314 - - - - - - 6,314

Office Equipment 1,962 - - - - - - 1,962

8,276 - - - - - 8,276

Total Cost / Deemed Cost 9,082,101 (29,657) 3,011,962 286,187 - (234,567) (7,365) 12,108,661

Balance As at

01.04.2018

Rs.’000

Transfers/ Adjustments

Rs. ‘000

Depreciation on

revaluation adjustment

Rs. ‘000

Charge for

the Year

Rs. ‘000

Impairment loss

for the Year

Rs. ‘000

Disposals during

the Year

Rs. ‘000

Assets Held For Sale

Rs. ‘000

Balance As at

31.03.2019

Rs.’000

Accumulated Depreciation

Freehold

Building 906,065 (32,504) - 115,318 5,135 (39,331) - 954,683

Plant & Machinery 1,301,405 - - 148,887 - (25,589) - 1,424,703

Motor Vehicles 297,621 - - 53,408 - (65,484) - 285,545

Furniture and Fittings 385,236 63 - 33,343 - (4,959) - 413,683

Office Equipment 343,010 (63) - 53,953 - (5,437) - 391,463

Linen & Soft Furnishings 101,031 - - 8,733 - (233) - 109,531

3,334,368 (32,504) - 413,642 5,135 (141,033) - 3,579,608

Leasehold

Motor Vehicles 3,205 - - 1,044 - - - 4,249

Office Equipment 1,902 - - 529 - - - 2,431

5,107 - - 1,573 - - - 6,680

Total Depreciation 3,339,475 (32,504) - 415,215 5,135 (141,033) - 3,586,288

Net Carrying Amount 5,742,626 8,522,373

Capital Work in Progress 111,117 (56,386) - 175,776 (3,441) - - 227,066

Total Carrying Amount of Property, Plant & Equipment 5,853,743 8,749,439


12.2 Company

Balance As at

01.04.2018Rs. ’000

Revaluation

Rs. ‘000

Additions during

the Year Rs. ‘000

Disposals during

the Year Rs. ‘000

Asset Held

For Sale Rs. ‘000

BalanceAs at

31.03.2019Rs. ’000

Cost/Deemed Cost Freehold Land 144,777 824,803 - (27,000) (7,365) 935,215 Land Development Cost 9,404 - - - - 9,404 Buildings 474,433 - 865 (55,894) - 419,404 Plant & Machinery 426,580 - 199 (22,973) - 403,806 Motor Vehicles 99,219 - 500 (52,656) - 47,063 Furniture and Fittings 240,524 - 5,615 (4,308) - 241,831

1,394,937 824,803 7,179 (162,831) - 2,056,723 Total Cost / Deemed Cost 1,394,937 824,803 7,179 (162,831) (7,365) 2,056,723

Balance As at

01.04.2018 Rs. ’000

Revaluation

Rs. ‘000

Charge for the

Year Rs. ‘000

Disposals during

the Year Rs. ‘000

Asset Held

For Sale Rs. ‘000

BalanceAs at

31.03.2019Rs. ’000

Accumulated DepreciationFreehold

Buildings 166,983 21,230 (38,395) 149,818

Plant & Machinery 306,823 27,589 (13,967) 320,445

Motor Vehicles 67,345 7,386 (44,638) 30,093

Furniture and Fittings 214,577 10,331 (3,614) 221,294

Total Depreciation 755,728 - 66,536 (100,614) 721,650

Total Carrying Amount of Property, Plant & Equipment 639,209 1,335,073

12.3 Fully depreciated property, plant and equipment still in use

ConsolidatedThe gross carrying amount of fully depreciated property, plant and equipment still in use as at 31 March 2019 is Rs. 674 Million (2018 - Rs.626 Million).

CompanyThe gross carrying amount of fully depreciated property, plant and equipment still in use as at 31st March 2019 is Rs. 367 Million (2018 - Rs. 306 Million).



12.4 The portfolio of the lands owned by Group companies are as follows:Company Name

Location Extent Number ofBuildings

Name of the Valuer

Effective Date of the

LatestValuation

Carrying Value of Lands As at

31.03.2019Rs. ‘000

Market value of Land As at31.03.2019

Rs. ‘000

i. Lankem Ceylon PLC

Land St. Anthony's Road, Ekala 2A:3R:36.35P 11 Mr. P. P. T. MohideenChartered Valuer 31.01.2019 381,080 381,080

Land Maguruwila Road,Gonawala 5A:1R:27.90P 18 Mr. P. P. T. MohideenChartered Valuer 31.01.2019 524,135 524,135

Land Maduramadu, Vembu, Puttalam 8A:3R:30.86P 2 Mr. P. P. T. MohideenChartered Valuer 31.03.2019 30,000 30,000

ii Marawila Resorts PLC

Land Marawila 29A:1R:33.6P 52 Mr. P. P. T. MohideenChartered Valuation 31.03.2019 1,180,700 1,180,700

iii Sigiriya Village Hotels PLCLand Freehold :Mankani, Trincomalee 8A:1R:2P - Mr P P T Mohideen 31.03.2019 231,400 231,400

Leasehold :Sigiriya 16A:3R:5.5P 39 Chartered Valuer iv B.O.T. Hotels Services (Pvt) Ltd.

Land Kapparatota Road, Weligama 3A:0R:10.59P 1 Mr P P T MohideenChartered Valuer 31.03.2019 525,550 525,550

v C.W. Mackie PLCLand Munagama, Horana. 3A:0R:5.21P 4

} Mr K. T. D. Tissera 31.03.2019Land Munagama, Horana. 2A:3R:33.07P 8Land Aramanagolla, Horana 5A:0R:0.5P 11 742,000 742,000Land Thebuwana, Narthupana 5A:1R:10P 8Land Kaluaggala, Hanwella 2A:0R:35P 7vi Galle Fort Hotel (Pvt) Ltd.

Land Galle Fort, Galle 0A:1R:37.5P 8 Mr P P T MohideenChartered Valuer 31.03.2019 1,216,700 1,216,700

vii Beruwala Resorts PLCLand Freehold :Moragalla, Beruwala 0A:0R:2.8P - Mr P P T Mohideen 31.03.2016 305 1,112

Leasehold :Moragalla, Beruwala 7A:3R:21.76P 24 Incorporated Valuer

viii JF Packaging (Pvt) Ltd.

Land Minuwangoda Road, Kotugoda. 2A:0R:30P 4 Mr P P T Mohideen

Chartered Valuer 31.03.2019 295,800 295,800

ix Ceylon Tapes (Pvt) Ltd

Land 23/20, Samagi Mawatha, Ja-Ela. 0A:1R:5P 3 Mr P P T Mohideen

Chartered Valuer 31.03.2019 13,500 13,500

5,141,170

12.4.1 Beruwala Resorts PLC, a subsidiary, has constructed a building on a land which was leased out from Sri Lanka Tourism Development Authority for 30 years commencing from 1st August, 2007. The lease period will expire on 31st July, 2037. The Company has paid the lease rental of Rs. 2,754,000/- in year 2018/19 (2017/18 - Rs. 1,836,000/-).

12.4.2 Sigiriya Village Hotels PLC, a subsidiary, has constructed a building on a land which was leased out from Sri Lanka Tourism Development Authority for 30 years commencing from 2nd September, 2009. The lease period will expire on 1st September 2039. The Company has paid the lease rental of Rs. 2,377,469/- in year 2018/19 (2017/18 - Rs. 2,377,469/-).

12.4.3 Each company in the Group has evaluated both internal and external indications of impairment of long lived assets and has not identified presence of any of such indications at the end of the financial year.

12.4.4 Property, Plant & Equipment pledged as securities in obtaining loans have been disclosed in Note 24.5 to these Financial Statements.


12.5 Sensitivity AnalysisPossible changes at the reporting date to one of the significant unobservable inputs, holding the other inputs constant, would have the following impacts.

Market price per perch (10% movement)Market Value

as at 31st March 2019

Increase+ 10%

Decrease- 10%

Lankem Ceylon PLC 935,215 93,522 (93,522)

Sigiriya Village Hotels PLC 231,400 23,140 (23,140)

Marawila Resort PLC 1,180,700 118,070 (118,070)

B.O.T Hotel Services (Pvt) Ltd 525,500 52,550 (52,550)

Galle Fort Hotels (Pvt) Ltd 1,216,700 121,670 (121,670)

Ceylon Tapes (Pvt) Ltd 13,500 1,350 (1,350)

JF Packaging Ltd 295,800 29,580 (29,580)

CW Mackie PLC 742,000 74,200 (74,200)

12.6 All above revaluations are based on market value. The revalued figures were incorporated in these Financial Statements for the first time due to change in accounting policy relating to the entire category of lands in Property, Plant and Equipment.

Market Comparable Method

This method considers the selling price of a similar property within a reasonably recent period of time in determining the fair value of the property being revalued. This involves evaluation of recent active market prices of similar assets, making appropriate adjustments for differences in size, nature, location, condition of specific property. In this process, outlier transactions, indicative of particularly motivated buyers or sellers are too compensated for since the price may not adequately reflect the fair market value.


2019 2018 2019 2018

Land 2,216,784 2,276,331 110,427 144,777

Total 2,216,784 2,276,331 110,427 144,777

13. BIOLOGICAL ASSETS

i) SunAgro Farms Ltd. - Mature PlantationsConsolidated

As atTotal

31.03.2019Rs. ’000

Total31.03.2018

Rs. ’000

Cost

At the beginning of the year 3,020 3,020

At the end of the year 3,020 3,020

Depreciation

At the beginning of the year 3,020 3,020

At the end of the year 3,020 3,020

Carrying amount - -

The requirement of recognition of bearer biological assets at its fair value less cost to sell under LKAS 41 was superseded by the ruling issued on 2nd March 2012, by The Institute of Chartered Accountants of Sri Lanka. Accordingly, the Group has elected to measure the bearer biological assets at cost using LKAS 16 - Property Plant and Equipment.



14. LEASEHOLD PROPERTIESConsolidated

As atBalance as at31.03.2019

Rs. ’000

Balance as at31.03.2018

Rs. ’000

Cost/Valuation

Leasehold Right to Bare Land

Balance at the beginning of the year 2,555 2,555

2,555 2,555

Balance at the end of the year 2,555 2,555

Accumulated Depreciation and Impairment

Leasehold Right to Bare Land



Carrying Amount - -

15. INVESTMENT PROPERTYConsolidated

As at 31.03.2019Rs. ’000

31.03.2018Rs. ’000

Cost


Additions during the period 1,131 235,319

Disposals during the year (49,969) -


Accumulated Depreciation


Charge for the Year 36,719 6,040


Carrying Amount 363,087 448,644

Consolidated

C. W. Mackie PLCThe company has rented out a part of C. W. Mackie PLC building complex and value of land and buildings of that portion has been classified as ‘investment property’ and accounted on “cost model” as required by LKAS 40-Investment Property.

As per the valuation carried out on 31 March 2019, by Mr. K. T. D. Tissera, J. P. U. M., an independent professional valuer, Diploma in Valuation (Sri Lanka), F. R. I. C. S.(Eng.), F. I. V. (Sri Lanka), Chartered Valuation Surveyor, these properties were valued based on income method for existing use basis.

Fair value of the investment property as at 31 March 2019 is as follows;

Company/Location Fair value Rs.Mn

C. W. Mackie PLC No: 36, D.R.Wijewardena Mawatha, Colombo 10 270.8

Sunquick Lanka Properties (Private) Limited Munagama, Horana 275.0

Total 545.8


Rent income is included in the statement of comprehensive income as follows;

For the year ended 31 March 2019Rs.000’s

2018Rs.000’s

2019Rs.000’s

2018Rs.000’s

Rent income

Direct operating expenses arising from investment property that generated rental income during the year 21,101 16,917 14,272 15,070

York Hotels (Kandy) Ltd.As s result of a change in the company ‘s bussiness plan, land recognised as property plant and equipment previously has been classified as investment property and accounted on “Cost Model” as required by LKAS 40 – Investment Property. The company intends to hold the land for capital appreciation. The above investment property is situated at Halloluwa, Katugastota and the extent of the land is 6 A, 1 R & 36 P. The carrying amount of investment property as at 31st March 2016, amounted to Rs. 157.1 Million.

As per the valuation carried out on 31st March 2016 by Mr. R.S. Wijesuriya, an Independent Incorporated Valuer, fair value of investment property as at 31st March 2016 is Rs. 374 Million.

16. INTANGIBLE ASSETS

Consolidated

As at 31.03.2019Rs. ’000

31.03.2018Rs. ’000

Goodwill

Balance at the beginning of the year 1,170,226 984,264

Goodwill on Acquisition of Subsidiary - 185,962

Balance at the end of the year 1,170,226 1,170,226

This represents the excess of the cost of acquisition over the attributable net assets of the following companies. The aggregate carrying amount of Goodwill allocated to each company is as follows:

Consolidated

As at 31.03.2019Rs. ’000

31.03.2018Rs. ’000

C.W. Mackie PLC 165,935 165,935

Galle Fort Hotel (Pvt) Ltd. 329,072 329,072

Sherwood Holidays Ltd 30,267 30,267

JF Packaging Ltd 435,500 435,500

Ceylon Tapes Ltd 23,490 23,490

Kiffs (Private) Limited 143,777 143,777

Alliance Five (Private) Limited 42,185 42,185

1,170,226 1,170,226

The recoverable value of C.W. Mackie PLC was based on fair value less cost to sell and the others were based on value in use. Value in use was determined by discounting the future cash flows generated from the investment. Key assumptions used are given below:

Business growth – Based on historical growth rate and business planInflation – Based on the current inflation and the total cost subjected to the inflationDiscount Rate – Average market borrowing rate adjusted for risk premiumMargin – Based on current margin and business plan



17. INVESTMENTS17.1 Investments in Subsidiaries17.1.1 CompanyAs at Group

Holding2019

%

CompanyHolding

2019%

GroupHolding

2018%

CompanyHolding

2018%

No. ofShares

31.03.2019

MarketValue

31.03.2019Rs.’000

Cost

31.03.2019Rs.’000

No. ofShares

31.03.2018

MarketValue

31.03.2018Rs.’000

Cost

31.03.2018Rs.’000

Quoted Investments

C.W.Mackie PLC 55.34 55.34 55.34 55.34 19,916,811 925,335 895,770 19,916,811 967,957 895,770

Sigiriya Village Hotels PLC 51.60 23.15 51.60 23.15 2,080,518 97,160 41,634 2,083,760 85,643 41,851

Marawila Resorts PLC 39.55 7.32 39.55 7.32 16,478,829 26,366 98,066 16,700,919 40,082 99,756

Beruwala Resorts PLC 52.68 - 52.68 - - - - - - -

Total Quoted Investments 1,035,470 1,037,377

Unquoted Investments

Colombo Fort Hotels Ltd. 69.11 68.85 69.11 68.85 2,329,326,024 1,595,115 2,329,326,024 - 1,595,115

Lankem Plantation Services Ltd. 60.00 60.00 60.00 60.00 179,993 1,800 179,993 - 1,800

Lankem Exports (Pvt) Ltd. 100.00 100.00 100.00 100.00 10,000 100 10,000 - 100

Lankem Paints Ltd. 100.00 100.00 100.00 100.00 2,000,000 20,000 2,000,000 - 20,000

Lankem Consumer Products Ltd. 100.00 100.00 100.00 100.00 2,000,000 20,000 2,000,000 - 20,000

Lankem Chemicals Ltd. 100.00 100.00 100.00 100.00 2,000,000 20,000 2,000,000 - 20,000

Lankem Research Ltd. 100.00 100.00 100.00 100.00 250,007 2,500 250,007 - 2,500

SunAgro Life Science Ltd. 100.00 100.00 100.00 100.00 200,000 2,000 200,000 - 2,000

SunAgro Farms Ltd. 100.00 100.00 100.00 100.00 1,200,000 12,000 1,200,000 - 12,000

SunAgro Foods Ltd. 100.00 100.00 100.00 100.00 4,999,994 50,275 4,999,994 - 50,275

Lankem Technology Services Ltd. 100.00 100.00 100.00 100.00 4,999,995 5,000 4,999,995 - 5,000

JF Packaging Limited 100.00 100.00 100.00 100.00 673,151 923,240 673,151 - 923,240

Associated Farms (Pvt) Ltd. 100.00 100.00 100.00 100.00 55,398 554 55,398 - 554

Nature's Link Limited 100.00 100.00 100.00 100.00 5,000,000 50,000 5,000,000 - 50,000

Total Unquoted Investments 2,702,584 2,702,584

Gross Carrying Amount 3,738,054 3,739,961

Less: Provision for Impairment

in Value of Investments (Note 17.1.2) (574,118) (494,688)

Net Carrying Amount 3,163,936 3,245,273

17.1.2 Provision for Impairment in SubsidiariesCompany

As at 31.03.2019Rs.’000

31.03.2018Rs.’000

Lankem Consumer Products Ltd. 20,000 20,000

Lankem Paints Ltd. 20,000 20,000

SunAgro Farms Ltd. 12,000 12,000

Associated Farms (Pvt) Ltd. 554 554

Lankem Plantation Services Ltd 1,800 1,800

Colombo Fort Hotels Ltd. 453,745 385,580

SunAgro Foods Ltd 50,275 50,275

Nature's Link Limited 12,843 4,078

Lankem Exports (Pvt) Limited 100 100

Lankem Research Ltd 2,500 -

Lankem Technology Services Ltd 301 301

574,118 494,688

i) The Company has made a provision for impairment on investments in subsidiaries due to continuous losses, negative operating cash flows and reduction in net assets in subsidiaries. The net assets/ adjusted net assets value of the respective subsidiaries have been considered as the recoverable amounts for the calculation of the provision for impairment as at the reporting date.

ii) All the subsidiaries of the Group are incorporated in Sri Lanka.


17.2 Investments in Associates

17.2.1 Investments in Associates – Consolidated

As at 31.03.2019Rs.’000

31.03.2018Rs.’000

Unquoted Investments

Consolidated Tea Plantations Ltd. (CTPL) - 351,436

Waverly Power (Pvt) Ltd. - (WPL) 149,713 132,798

Total Unquoted Investments 149,713 484,234

Balance as at beginning of the year 484,234 581,836

Net Share of Loss for the year (334,521) (97,602)


17.2.2 Investments in Associates – Company

As at Principal Business Activities

Holding2019

%

Holding2018

%

No. of Shares31.03.2019

Cost31.03.2019

Rs.’000


Cost31.03.2018

Rs.’000

Unquoted InvestmentsConsolidated Tea Plantations Ltd.

Investing in Plantations 47.56 47.56 19,500,001 220,500 19,500,001 220,500

Waverly Power (Pvt) Ltd Generating electricity for the national grid

43.59 43.59 3,400,000 102,000 3,400,000 102,000

Gross Carrying Amount 322,500 322,500 Provision for Impairment in Associates (17.2.2.1)

(31,101) -

Net Carrying Amount 291,399 322,500

17.2.2.1 Provision for Impairment in Associates

Company

As at 31.03.2019Rs.’000

31.03.2018Rs.’000

Consolidated Tea Plantations Ltd. 31,101 -

31,101 -



17.2.3 Summarised financial information of Associates Companies

Summary of the Statement of Financial Position

As at

CTPL31.03.2019

Rs.’000

WPL31.03.2019

Rs.’000

CTPL31.03.2018

Rs.’000Restated

WPL31.03.2018

Rs.’000

Non-current Assets 11,876,714 174,635 11,498,054 179,873

Current Assets 3,428,099 88,587 4,553,460 47,771

Total Assets 15,304,813 263,222 16,051,514 227,644

Non-current Liabilities 6,312,895 61,299 6,238,676 64,679

Current Liabilities 8,628,050 7,588 7,965,137 7,434

Total Liabilities 14,940,945 68,887 14,203,813 72,113

Equity Attributable to the Owners of the Company 363,868 194,335 1,847,701 155,531

Minority Interest (800,906) - (1,173,572) -

Total Net Assets (437,038) 194,335 674,129 155,531

Ownership interest 47.56% 43.59% 47.56% 43.59%

Investees share of Net Assets (30,820) 84,711 320,616 67,796

Goodwill 30,820 65,002 30,820 65,002

Carrying amount of interest - 149,713 351,436 132,798

Summmary of the Statement of Profit or Loss

For the Year Ended

CTPL31.03.2019

Rs.’000

WPL31.03.2019

Rs.’000

CTPL31.03.2018

Rs.’000Restated

WPL31.03.2018

Rs.’000

Revenue 12,031,209 87,815 12,874,404 63,864

Depreciation and amortization (469,688) (14,513) (387,256) (13,498)

Interest expense (1,235,204) (7,451) (813,682) (11,159)

Income and expenses (11,942,838) (27,047) (11,851,568) (19,422)

Investees share of Profit / (Loss) - 16,915 (106,227) 8,625

17.2.4 Consolidated Tea Plantation Ltd. (CTPL) Group has invested in plantation sector (Kotagala Plantations PLC, Agarapatana Plantations Ltd. and Lankem Tea & Rubber Plantations (Pvt) Ltd.) and other sectors (Lankem Developments PLC, Waverly power (Pvt) Ltd. and Union Commodities) as at 31st March 2019. Since the plantation sector companies have incurred operating losses, CTPL reported negative net assets of Rs. 437 Mn as at 31st March 2019. However, the Company has recognized the investee’s share of net assets only up to the carrying amount of the investment of Rs. 351 Mn, since the Company is only liable up to the investment made in CTPL.


17.3 Investment in Joint Venture

Sunquick Lanka (Private) Limited

CW Makie PLC has 49% interest in Sunquick Lanka (Private) Limited, group’s interest is accounted using the equity method in the Consolidated Financial Statements.

The Group’s interest in Sunqick Lanka (Private) Limited is accounted for using the equity method in the Consolidated Financial Statements. Summarized financial information of the joint venture and the reconciliation with the carrying amount of the investment in the Financial Statements are set out below.

Summarised financial information of the joint venture and reconciliation with the carrying amount of the investment in the financial statements are set out below.

As atSQL

31.03.2019Rs.’000

SQL31.03.2018

Rs.’000

Summmary of the Statement of Finanical Position

Non-current Assets 427,457 240,747

Current Assets 878,611 888,751

Non - Current Liabilities - 4,669

Current Liabilities (624,839) (538,823)

Equity 681,229 586,007

Gross carrying amount of the investments 333,802 287,143

Summmary of the Statement of Profit or Loss

Revenue 1,475,450 1,041,722

Operating Expenses (1,376,635) (1,075,862)

Other operating income 4,732 -

Finance Income 7,249 1,967

Finance Cost - (10,065)

Income tax (15,225) -

Other comprehensive income (348) -

Total comprehensive income/(expenses) for the year 95,223 (42,238)

Group’s Share of Profit/(Loss) for the year 46,659 (20,697)

Equity Reconciliation

Carrying Value as at 1st April 287,143 -

Investment made during the year - 307,840

Share of Profit / (Loss) 46,659 (20,697)

Carrying Value as at 31st March 333,802 287,143

17.4 Investments Classified as Available for Sale/Fair Value Through OCI


As at 31st March Note2019

Rs.’0002018

Rs.’0002019

Rs.’0002018

Rs.’000

Quoted Investments 17.4.1. 17,779 29,653 15,598 26,874 Unquoted Investments 17.4.2. 24,198 34,533 23,948 34,283

41,977 64,186 39,546 61,157



17.4.1 Quoted InvestmentsGroup

Consolidated

As at No. of Shares

31.03.2019Fair Value

31.03.2019Rs.’000

No ofShares

31.03.2018

Fair Value31.03.2018

Rs.’000

Bank, Finance & InsuranceNations Trust Bank PLC 6,365 600 6,365 527 National Development Bank PLC 5,724 588 5,724 788

Total 1,188 1,315

Hotels & TravelHunas Falls Hotels PLC 400 72 400 26 Pegasus Resorts PLC 960 23 960 27 Renuka City Hotels PLC 525 131 525 140 Royal Palms Beach Hotels PLC 375 6 375 7 Total 232 200

PlantationsKotagala Plantations PLC 1,085,762 7,600 918,167 7,254 Lankem Development PLC 2,352,340 7,998 2,687,691 19,620 Total 15,598 26,874

HealthcareCeylon Hospitals PLC 130 9 130 10 Total 9 10

OtherChevron Lubricants Lanka PLC 12,000 752 12,000 1,254 Total 752 1,254 Total Quoted Investments 17,779 29,653

Company

Company

As atNo of Shares 31.03.2019


Rs.’000

No of Shares31.03.2018

Market Value31.03.2018

Rs.’000

Lankem Development PLC 2,352,340 7,998 2,687,691 19,620

Kotagala Plantations PLC 1,085,762 7,600 918,167 7,254

Total 15,598 26,874

17.4.2 Unquoted Investments Group

Consolidated

As atFair Value


31.03.2019Rs.’000



Rs.’000

Nanotechnology (Pvt) Ltd. 3,810,182 12,336 3,810,182 14,288 Lankem Tea & Rubber Plantations (Pvt) Ltd 8,342 1,554 8,342 2,728 Agarapatana Plantation Ltd. 1,760,204 10,058 1,760,204 17,267 Asia Pacific Golf Courses Limited 2,500 250 2,500 250 Total 24,198 34,533

Sector classification and market value of shares of quoted investments are based on the official valuation list published by the Colombo Stock Exchange.


Company

Company

As atNo of Shares31.03.2019


Rs.’000

No of Shares31.03.2018


Rs.’000

Nanotechnology (Pvt) Ltd. 3,810,182 12,336 3,810,182 14,288

Lankem Tea & Rubber Plantation (Pvt) Ltd. 8,342 1,554 8,342 2,728

Agarapatana Planatations Limited 1,760,204 10,058 1,760,204 17,267

Total 23,948 34,283

17.5 Investments Classified as Fair Value through Profit or Loss

Consolidated/Company

As at No. of Shares


31.03.2019Rs.’000



Rs.’000

Nations Trust Bank PLC 46,751 4,203 45,759 3,693

Tokyo Cement Company PLC (Voting) 148,270 3,069 148,270 8,007

Tokyo Cement Company PLC (Non Voting) 63,667 1,178 63,667 2,929

Colonial Motors PLC 338,547 12,222 338,547 24,985

MTD Walkers PLC 68,845 1,019 68,845 1,411

Union Bank Colombo PLC 384,000 4,224 384,000 4,915

Serendib Engineering Group PLC - - 1,576,951 12,458

Orient Garments PLC 610,320 4,272 610,320 4,272

Renuka Agri Foods PLC 200,000 2,620 200,000 3,240

Maskeliya Plantations PLC - - 8,000 154

ACME Printing & Packaging PLC 59,474 208 397,881 2,347

33,015 68,411

18. INVENTORIES


As at 31.03.2019 Rs.’000

31.03.2018Rs.’000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Raw Materials 658,613 610,598 263,933 207,061

Work-in-Progress 86,487 81,746 38,158 44,623

Finished Goods 1,474,364 1,297,254 314,324 389,341

Goods-in-Transit 208,627 49,529 102,780 39,282

Consumable Stock 129,103 123,199 - -

Packing & Other Materials 5,205 16,043 - -

2,562,399 2,178,369 719,195 680,307

Less: Provision for Obsolete and Slow Moving Inventories (187,647) (151,693) (75,813) (84,215)

2,374,752 2,026,676 643,382 596,092



19. TRADE AND OTHER RECEIVABLES


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Trade Receivables 3,939,363 4,168,135 877,748 1,087,787

Provision for Impairment on Trade Receivables (Note 19.1.1) (328,041) (291,574) (180,390) (135,706)

3,611,322 3,876,561 697,358 952,081

Other Receivables 187,121 154,882 31,824 29,387

Deposits, Advances and Prepayments 249,052 292,860 - -

Staff Loan 23,862 20,546 139 141

Tax Recoverable (Note 19.2) 246,319 157,944 89,688 73,108

Provision for Impairment on Other Receivables (Note 19.1.2) (23,421) (23,421) - -

682,933 602,811 121,651 102,636

4,294,255 4,479,372 819,009 1,054,717

19.1 Provision for impairment


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Provision for impairment on Trade Receivables (Note 19.1.1) 328,041 291,574 180,390 135,706

Provision for impairement on Other Receivables (Note 19.1.2) 23,421 23,421 - -

351,462 314,995 180,390 135,706

19.1.1 Provision for Impairment on Trade Receivables

The movement in the allowance for impairment in respect of trade and other receivables during the year is given below. Comparative amounts for 2018 represents the allowance for impairment losses under LKAS 39.


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Balance as at 1st April under LKAS 39 291,574 224,457 135,706 94,344

Adjustment on initial application of SLFRS 9 25,750 - 23,343 -

Balance as at 1st April under SLFRS 9 317,324 224,457 159,049 94,344

Measurement of loss allowance for the year 14,257 80,443 21,341 41,362

Reversal of impairment loss (1,197) - - -

Write-off during the year (2,343) (13,326) - -

Balance as at 31st March 328,041 291,574 180,390 135,706


19.1.2 Provision for Impairment on Other Receivables


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Balance as at 1st April 23,421 23,421 - -

Provision made during the year - - - -

Balance as at 31 March 23,421 23,421 - -

19.2 Taxes Recoverable


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Nation Building Tax Recoverable 2,913 971 - -

Economic Service Charge Recoverable 146,913 108,495 89,688 73,108

Withholding Tax Recoverable 13,411 470 - -

Value Added Tax Recoverable 83,082 48,008 - -

246,319 157,944 89,688 73,108

20. CASH AND CASH EQUIVALENTS


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Favourable Balance

Fixed Deposits 208,045 319,360 10,000 166,451

Cash at Bank 273,563 880,483 26,538 584,831

Cash in Hand 8,863 10,725 946 2,414

490,471 1,210,568 37,484 753,696

Unfavourable Balance

Bank Overdraft (986,015) (1,401,975) (518,053) (778,424)

(495,544) (191,407) (480,569) (24,728)

21. ASSET HELD FOR SALE

The company has classified its lease rights at Nawam Mawatha and Kandathoduwawa,Putlam as held for Sale since the Board of Directors has decided to proceed with selling the asset . Indicate values/proceeds of lands are Rs. 60 Million and Rs. 7.3 Million as at 31st March 2019.



22. STATED CAPITALAs at 31.03.2019 31.03.2018

No. of Shares

Value of Shares

Rs.’000

No. of Shares

Value of Shares

Rs.’000

Fully paid ordinary shares at beginning of the year 33,853,200 930,346 24,000,000 536,218

Issued during the year - - 9,853,200 394,128

At the end of the Year 33,853,200 930,346 33,853,200 930,346

The holders of ordinary shares are entitled to receive dividend as declared from time to time and are entitled to one vote per individual present at meetings of the shareholders or one vote per share in the case of a poll.

23. CAPITAL RESERVES

Other Capital

ReservesRs.’000

FVOCI / AFS Reserve

Rs.’000

Total

Rs.’000

Consolidated

Balance as at 01st April 2018 4,833 12,734 17,567

Net Loss on Financial Assets Available for Sale / FVOCI - (17,440) (17,440)

Balance as at 31st March 2019 4,833 (4,706) 127

Company

Balance as at 01st April 2018 - 14,122 14,122

Net Loss on Financial Assets Available for Sale / FVOCI - (17,104) (17,104)

Balance as at 31st March 2019 - (2,982) (2,982)

23.1 Other Capital ReservesThe amount set aside out of the retained profits by C. W. Mackie PLC as Export Development Grant Reserve.

23.2 Available for Sale ReservesThe amount set aside out of retained profits for the changes in the fair value of investments is classified as available for sale.


24. INTEREST BEARING BORROWINGS Consolidated Company

As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Payable after one year

Finance Lease Obligations- Others (Note 24.1) 795 1,201 - -

Long Term Loans - Others (Note 24.3) 3,964,876 2,606,073 2,281,249 1,536,621

3,965,671 2,607,274 2,281,249 1,536,621

Payable within one Year

Finance Lease Obligations- Others (Note 24.1) 425 463 - -

Long Term Loans - Others (Note 24.3) 993,408 1,107,337 488,841 777,624

Short Term Loans (Note 24.4) 2,626,368 3,868,444 948,822 1,825,711

3,620,201 4,976,244 1,437,663 2,603,335

Loans Payable to Related Parties (Note 24.2) 215,144 158,144 148,090 132,164

Total 3,835,345 5,134,388 1,585,753 2,735,499

Total Interest bearing Borrowings 7,801,016 7,741,662 3,867,002 4,272,120

24.1 Finance Lease Obligations – Others


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Balance at the beginning 1,664 3,233 - -

Leases acquired during the year 463 1,854 - -

Payments made during the year (611) (3,026) - -

Less: Interest in Suspense (296) (397) - -

Balance at the end of the year 1,220 1,664 - -

Analysis of Finance Lease Obligations by year of repayment:


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Payable within one year

Gross Lease Obligations 570 3,401 - -

Less: Finance Charges Unamortised (145) (2,938) - -

Net Lease Obligations 425 463 - -

Payable within two to five years

Gross Lease Obligations 958 1,498 - -

Less: Finance Charges Unamortised (163) (297) - -

Net Lease Obligations 795 1,201 - -



24.2 Loans Payable to Related Parties


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Balance at the beginning 158,144 426,100 132,164 483,050

Loans transferred / obtained during the year 150,000 262,544 285,000 391,199

Payments made during the year (93,000) (530,500) (269,074) (742,085)

Balance at the end 215,144 158,144 148,090 132,164

Payable within one year (215,144) (158,144) (148,090) (132,164)

Payable after one year - - - -

Loans payable to related parties are as follows:


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

The Colombo Fort Land & Building PLC 70,000 80,000 - -

Sigiriya Village Hotels PLC - - 49,164 49,164

J.F.Packaging Ltd. - - 26,926 78,000

Lankem Development PLC 10,600 10,600 - -

Waverly Power (Pvt) Limited 12,544 12,544 - -

E.B. Creasy & Company PLC 72,000 5,000 72,000 5,000

Lankem Tea & Rubber Plantations (Pvt) Ltd 50,000 50,000 - -

215,144 158,144 148,090 132,164

The Company has obtained loans from related parties and interest on the outstanding balances is charged at the rates as specified below;

AmountRs. ‘000

E.B. Creasy & Company PLC (at AWPLR + 2%) 72,000

Sigiriya Village Hotels PLC (at AWPLR + 2%) 49,164

J.F.Packaging Ltd. (at 16.5%) 26,926

148,090


24.3 Long Term Loans – Others


As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Balance at the beginning 3,713,410 3,488,707 2,314,245 2,188,825

Loans obtained during the year 2,945,779 1,142,324 1,495,149 666,445

Effect on foreign currency fluctuations 36,936 13,619 - -

Payments made during the year (1,737,841) (931,240) (1,039,304) (541,025)

Balance at the end 4,958,284 3,713,410 2,770,090 2,314,245

Payable within one year (993,408) (1,107,337) (488,841) (777,624)

Payable after one year 3,964,876 2,606,073 2,281,249 1,536,621

24.4 Short Term Loans


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Term Loans 1,627,709 2,497,540 487,999 1,104,430

Trust Receipt Loans 998,659 1,370,904 460,823 721,281

2,626,368 3,868,444 948,822 1,825,711

24.5 Assets pledged as Security Against Interest Bearing Borrowings

Company Lender Balanceas at

31.03.2019(Rs.) Million

Balanceas at

31.03.2018(Rs.) Million

Terms ofRepayment

Security Pledged

Lankem Ceylon PLC

Sampath Bank PLC

Loan 01 60.11 -

In 60 monthly installments with step-up capital repayment plan, with 12 months capital grace period, as follows.

1-12 Months - Rs.0.25 Million, 13-24 Months - Rs.0.625 Million, 25-36 Months - Rs.0.750 Million, 37-48 Months - Rs.0.875 Million, 49-59 Months - Rs.2.71 Million & 60th Month Rs.0.302 Million per month, interest to be serviced separately on monthly basis.

(a) Term Loan Agreement of Rs. 60.11 Million

(b) Term Loan Agreement of Rs. 189.8 Million

(c) Hypothicaticon bond over stocks and book debts of Pannala Rs.450 Million

(d) Corporate guarntee of E.B. Creasy & Company PLC Rs. 250 Million

Loan 02 83.21 - In addition to this loan Rs.106.68 Million is granted in Month of April 19. In 60 monthly installments in following manner after a grace period of 12 months. 1-12 Months - Rs.0.75 Million, 13-24 Months - Rs.1.875 Million, 25-36 Months - Rs.2.250 Million, 37-48 Months - Rs.2.625 Million, 49-59 Months - Rs.8.130 Million & 60th Month Rs.10.458 Million per month, interest to be serviced separately on monthly basis.




31.03.2019(Rs.) Million

Balanceas at

31.03.2018(Rs.) Million

Terms ofRepayment

Security Pledged

Commercial Bank of Ceylon PLCLoan 02 36.5 178.8 In December 2017 Existing loan was

convert to new reschedulement facility. In 55 monthly installments of Yr -1 Rs.0.5 Million, Yr -2 Rs.2 Million, Yr - 3 Rs.3.5 Million ,Yr - 4 Rs.5 Million , Yr - 5 Rs. 7 Million for 6 months and a final instalmment of Rs.6.8 Million together with interest payable monthly on reducing balance of capital

a) Primary Mortgage for Rs.200 Million over land at Ja-ela & Gonawala.

b) Secondary Mortgage Bond No. 528 dated 07-04-1998 for Rs.50 Million executed over above property.

c) Tertiary Mortgage Bond for Rs. 307 Million over above property.

d) Additional Mortgage Bond for Rs.400 Million over stocks and assignment of book debts to be executed by the Company.

Loan 03 162.4 172.40 In 57 monthly installments of Rs.4.2 Million /- each and a final installments of Rs.2.2 Million together with interest payable monthly on reducing balance of capital.

Loan 04 37.2 198.50 In 60 monthly installments of Yr -1 Rs.0.5 Million, Yr - 2 Rs.2 Million, Yr - 3 Rs.3 Million ,Yr - 4 Rs.5 Million , Yr -5 Rs.6 Million for 11 months and a final instalmment of Rs.8 Million together with interest payable monthly on reducing balance of capital

Loan 05 103.5 111.00 In 60 monthly installments of Yr -1 Rs.0.5 Million , Yr - 2 Rs.1 Million, Yr - 3 Rs.1.5 Million ,Yr - 4 Rs.2 Million , Yr - 5 Rs.4 Million for 11 months and a final instalmment of Rs.8.5 Million together with interest payable monthly on reducing balance of capital

Loan 06 188.0 86.50 In 60 monthly installments of Yr -1 Rs.0.2 Million, Yr - 2 Rs.0.7 Million, Yr - 3 Rs.1.3 Million, Yr - 4 Rs.2 Million, Yr - 5 Rs.6 Million for 11 months and a final instalmment of Rs.8 Million together with interest payable monthly on reducing balance of capital

Loan 07 82.3 39.70 In 60 monthly installments of Yr -1 Rs.0.1 Million, Yr - 2 Rs.0.4 Million, Yr - 3 Rs.0.6 Million,Yr - 4 Rs.1 Million, Yr - 5 Rs.1.2 Million for 11 months and a final instalmment of Rs.1.6 Million together with interest payable monthly on reducing balance of capital



31.03.2019(Rs.) Million

Balanceas at

31.03.2018(Rs.) Million

Terms ofRepayment

Security Pledged

Peoples’ Bank 545 575.50 In May 2018 Existing loan Rs.555 Million was convert to new reschedulement facility. Month 1 installments is Rs.20.5 Million. After reschdulement. Month 2 onwards Rs.2.5 Million for 6 Months, Rs.8.0 Million for 12 Months and Rs.17.76 Million for 25 Months.

Mortgage over stocks and Book debts on crystallization basis.

National Development Bank

Payable quarterly on or before the last banking day of each quarter

Loan - 1 - 247.25 Yr 1 to Yr 4 - Q1-Q3 equal installments of Rs.15.25 Million and Q4 - 26.50 Million.Yr 5 - Q1-Q4 equal installments of Rs.15.25 Million Yr 5 - Q1-Q4 equal installments of Rs.15.25 Million

Loan -2 250.9 - Payable over 48 monthly installments inclusive of 6 month of grace period

Mortgage over stocks and Book debts.

Bank of CeylonLoan 1 - 507.14 In 84 monthly installments of Rs.7.143

Million eachLoan 2 335.00 - In 60 monthly installments inclusive of

12 Months grace periodAssignment over public quoted shares 16,000,000 of C.W.Mackie PLC.

Seylan Bank - 23.21 Commercial Leasing PLC

- 26.09

Central Finance Co PLC

21.56 28.15 In 48 monthly equal installments of Capital & Interst Rs.0.917 Million each.

Mortgage and special power of Attorney of 10 No.of Double cab vehicle Promissory note.

Union Bank Colombo PLCLoan 01 32.49 40.00 In 36 monthly installments of Yr -1

Rs.0.75 Million, Yr - 2 Rs.1 Million, Yr - 3 Rs.1.5 Million for 11 months and a final instalmment of Rs.2.5 Million. together with interest payable monthly on reducing balance of capital.

Loan 02 74.00 80.00 In 60 monthly installments of Yr - 1 to Yr - 3 Rs.0.6 Million, Yr - 4 Rs.2.45 Million, Yr - 5 Rs.2.45 Million for 11 months and a final instalmment of Rs.2.05 Million. together with interest payable monthly on reducing balance of capital.




31.03.2019(Rs.) Million

Balanceas at

31.03.2018(Rs.) Million

Terms ofRepayment

Security Pledged

Nations Trust bank

273.69 - In 47 monthly installments of 10 Monthly installments Rs.1.00 Million, 12 Monthly installments of Rs.3.00 Million, 12 Monthly installments of Rs.9.00 Million,12 Monthly installments of Rs.12.00 Million and final installments of Rs.2.00 Million. interest to be serviced separately on monthly basis.

Mortgage over stocks and book debts of Rs. 300 Million.

Letter of comfort from Colombo Fort Land & Building PLC

Hatton National bank

405.00 - In 60 equal monthly installments Rs.6.75 Million together with interest commencing after an initial grace period of 12 months

Letter of awareness/ comfort from Colombo Fort Land & Building PLC

Peoples Leasing & Finance PLC

79.24 In 48 monthly installments in following manner. 1st 12 Months - Rs.0.50 Million, 2nd 12 Months - Rs.1.00 Million, Balance in equal installment with in period of 24 Months.

Security Cheques (roll over) for Rs.79.24 Million, and Promissory Note of Rs.79.24 Million

2,770.10 2,314.24

BOT Hotel Services (Pvt) Ltd.

PABC Bank PLC - 33.38 Repayable over 78 monthly installments

The property of the Hotel premises which is situated in Kapparathota, Weligama - Rs.50 Million and Corporate guarantee from Beruwala Resorts PLC for Rs.75 Million.

Term Loan

- 33.38 Beruwala Resorts PLC

PABC Bank PLC - 176.41 Repayable over 102 monthly installment. Repayment to commence after a grace period of 18 Months from the first draw down.

Primary mortgage over land and buildings of BOT Hotel Services Ltd. situated at Weligama.

Term Loan

Cargills Bank PLCTerm Loan 1

3.90 9.00 Repayable over 48 monthly installment.

Laundry Machine & Equipments.


1.00 2.06 Repayable over 48 monthly installment.

Mazda car for Rs.5.9 Million.


3.17 5.18 Repayable over 47 Monthly installments. Repayment to Commence after a grace period of 18 months from the first draw down.

Secondary mortgage over laundry machine.

Term Loan 4 USD

176.77 - “Primary Mortgage executed over Land and Buildings of B.O.T Hotel Services (Pvt) Ltd situated at Weligama for the Term Loan

from Cargills Bank Ltd”Term Loan 5 56.34 -

241.18 192.65



31.03.2019(Rs.) Million

Balanceas at

31.03.2018(Rs.) Million

Terms ofRepayment

Security Pledged

Sigiriya VillageHotels PLC

Sampath Bank PLC

127.43 127.29 Repayable over 35 monthly installments.

Rs.100.5 Million Lien over Beruwala Resort PLC shares totaling to 85,384,000 numbers lodged in Sampath Bank custodial account and Rs.17.5 Million Mortagagee over Hotel Kitchen Equipment and other accessories.

Term Loan

127.43 127.29 Marawila Resorts PLC

Hatton National Bank PLCTerm Loan - 224.63 To be repaid in five years Existing Secondary Floating mortgage

Bonds totaling US$ 5.37 Million over the Hotel premises at Marawila.

Commercial Bank of Ceylon PLC

69.3 29.90 Floating mortgage Bond No: CTY/MBO/17/06/03 dateds 10/08/2017 for Rs.25,000,000/- obtained over assignment of book debtstotaling US$ 5.37 Million over the Hotel premises at Marawila


218.57 - To be repaid in June 2024. Primary concurrent mortgage over the existing Land and secondary mortgage to be enhanced by US $ 0.27 Million. Additional security to be executed over the new property where the new rooms are constructed and Plant & Machinery installed there.

287.87 247.53 Galle Fort Hotels (Pvt) Ltd.

Cargills Bank PLCLoan 01 53.91 61.88 Repayable over 58 monthly

installments.Primary nrortgage bond over properly for Rs 35 Million and 0.775Million USD, mentioned as Lot X in the plan no 130 situated at Galle Fort village.

Loan 02 21.26 27.63 Repayable over 59 monthly installments.

Loan 03 34.26 39.14 Repayable over 59 equal monthly installments.

109.43 128.65 Ceylon Tapes (Pvt) Ltd.

DFCC Bank PLC

- Repayable over 60 monthly installments after a grace period of 6 months from the first disbursement

Land worth of Rs.12.5 Million and machinery worth Rs.8 Million have been pledged when obtaining the loan.

Term Loan - 2.17

Commercial Bank

- 26.25 Floating primary mortgage bond for Rs.50 Million over the property called Franalyn estate and morefully as lot A in plan no. 7221 dated 26.11.2015 made by Mr. P A K J Perera in extent of A2: R 3: p 18.25 to be executed by the company.

- 28.42




31.03.2019(Rs.) Million

Balanceas at

31.03.2018(Rs.) Million

Terms ofRepayment

Security Pledged

JF Packaging Ltd. Sampath Bank PLCLoan I 31.17 41.25 Repayable over 59 monthly

installmentsHypothecation Bond for Rs.105 Million over stocks and book debts held at factory premises at No. 306, Minuwangoda Road, Kotugoda.

Loan II 6.27 12.55 Repayable over 35 monthly installments

Mortgage over Drylaminating machine and related equipments.

Loan III 112.72 134.35 Repayable over 60 monthly installments

Corporate guarantee of Lankem Ceylon PLC and Shares of Alliance Five (Pvt) Ltd.

Bank of CeylonLoan II, III, ,VI, VII

430.28 14.91 Repayable over 60 monthly installments

Primary mortgage of Land, building and machinery 1:1048576 at No.306, Minuwangoda Road, Kotugoda.

Loan I 4.13 16.53 Repayable over 96 monthly installments

Loan IV 128.52 136.25 Repayable over 48 monthly installments

Loan V 96.22 119.1 Repayable over 72 monthly installments

Hatton National Bank PLCNation Trust Bank PLCLoan I 113.13 - Repayable over 48 monthly

installmentsMortgage over stocks and book debts held at factory premises at No:306,Minuwangoda Road, Kotugoda and corporate guarantee of Lankem Ceylon PLC

922.44 474.94 Kiffs (Private) Limited

National Development Bank PLCLoan I 6.88 - Repayable over 48 monthly

installmentsPrimary mortgage over equipment located at No:179/6 , Ragama road, Kadawatha

6.88 - SunAgro Foods Ltd.

Sampath Bank PLC

- 7.76 In 47 equal monthly installments of Rs.2.08 Million. and a final installment of Rs.2.05 Million on 26th day of each month commencing after a grace period of 12 months.

Corporate Guarantee from Lankem Ceylon PLC amounting to Rs.110 Million.


- 2.39 In 35 equal monthly installments of Rs.695,000/- and a final installment of Rs.675,000/- together with interest.

- 10.15



31.03.2019(Rs.) Million

Balanceas at

31.03.2018(Rs.) Million

Terms ofRepayment

Security Pledged

Kelani Valley Canneries Limited


3.49 4.04 Mortgage bond over the machinery valued Rs.3 Million and motor vehicle valued Rs.9 Million at Kaluaggala, Hanwella

3.49 4.04 C. W. Mackie PLC Commercial

Bank of Ceylon PLC

291.55 -

291.55 - SunAgro LifeScience Ltd.


144.06 147.06 Repayable Over 60 Monthly Installment.

Corporate Guarantee from Lankem Ceylon PLC amounting to Rs.100 Million.

Peoples Leasing & Finance PLC

53.86 - Repayable over 48 monthly installments.

Security Cheques (roll over) for Rs.53.86 Million, and Promissory Note of Rs.53.86 Million

197.92 147.06

25. DEFERRED INCOMEConsolidated Company

As at 31.03.2019 Rs.’000

31.03.2018Rs.’000

31.03.2019 Rs.’000

31.03.2018Rs.’000

At the beginning of the year 27,897 27,897 - -

At the end of the year 27,897 27,897 - -

Amortisation

At the beginning of the year 13,128 10,305 - -

Amortisation for the year 2,823 2,823 - -

At the end of the year 15,951 13,128 - -

11,946 14,769 - -

26. DEFERRED TAX (ASSETS) / LIABILITIESConsolidated Company

As at 31.03.2019 Rs.’000

31.03.2018Rs.’000

31.03.2019 Rs.’000

31.03.2018Rs.’000

Balance as at the beginning of the year 198,199 41,298 (111,058) (61,198)

Organisation of Temporary Differences

Recogized through P&L (328,119) (18,662) (240,482) (61,709)

Recogized through OCI 713,885 (13,791) 232,999 11,849

Recogized through Equity - 189,354 - -

Balance as at the end of the year 583,965 198,199 (118,541) (111,058)



26.1 Deferred Tax Composition


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Deferred Tax AssetsDefined Benefit Obligations 59,976 58,147 35,669 35,701Tax Losses carried forward 551,028 291,352 314,633 170,156Provision for Impairment of Trade Receivables 101,053 16,546 91,976 11,066 Provision for obsolete Inventories 2,653 - - - On Finance Expenses 20,101 - - -Deferred lease rent liability 354 - - -

735,165 366,045 442,278 216,923

Deferred Tax LiabilitiesProperty, Plant and Equipment 592,519 374,890 68,327 81,399 Revaluation surplus 726,611 189,354 255,410 24,466

1,319,130 564,244 323,737 105,865 Net Deferred Tax Assets / (Liabilities) (583,965) (198,199) 118,541 111,058

Deferred tax liabilities have been computed by using an effective tax rate of 28% for the Company and for the subsidiaries of the Group, the effective tax rate ranging from 14% to 28% have been used for the deferred tax computation.

27. RETIREMENT BENEFIT OBLIGATIONSConsolidated Company

As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Present Value of the Funded Obligations (Note 27.2) 236,780 238,982 130,745 130,618

Present Value of the Unfunded Obligations (Note 27.4) 72,741 72,661 - -

Present Value of the Obligations 309,521 311,643 130,745 130,618

Fair Value of Retirement Benefit Assets (Note 27.1) (56,142) (47,272) (3,355) (3,115)

Present Value of Net Obligations 253,379 264,371 127,390 127,503

Company

An Actuarial valuation has been carried out as at 31st March 2019 by Messrs. Actuarial and Management Consultants (Private) Ltd. as required by the Sri Lanka Accounting Standard 19 ‘Employee Benefits’.

Plan Assets of the Company are held by an approved external gratuity fund where it invests in insurance scheme amounting to Rs. 3.3 Million as at the date of Statement of Financial Position.

The valuation method used by the actuary is the ‘Project Unit Credit Method’, the method recommended by Sri Lanka Accounting Standard 19 -’Employee Benefits’.

27.1 Fair Value of Retirement Benefit Assets


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Movements in Fair Value of Plan AssetsFair Value of Plan assets at the beginning of the year 47,272 107,380 3,115 64,486 Contribution Paid to the Plan Assets 11,642 8,348 - - Expected Return on Plan Assets 4,804 16,777 343 12,319 Benefits paid by the Plan Assets / the Company (6,896) (78,473) - (67,859)Actuarial Gains (680) (6,760) (103) (5,831)Fair Value of Retirement Benefit Assets 56,142 47,272 3,355 3,115


27.2 Present Value of the Funded Obligations


For the Year Ended 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Movement in Present Value of Funded Obligations

Balance at the beginning of the year 238,982 225,313 130,618 139,954

Transfer in (1,340) - (1,340) -

Provision for the year 60,942 45,573 24,328 28,833

298,584 270,886 153,606 168,787

Benefits paid by the Plan Assets / the Company (30,894) (90,344) (15,421) (77,397)

Actuarial (Gains)/Losses (30,910) 58,440 (7,440) 39,228

Present Value of Defined Benefit Obligations 236,780 238,982 130,745 130,618

Expenses Recognised in the Statement of Profit or Loss

Current Service Cost 27,393 18,112 10,107 11,339

Interest Cost 33,549 27,461 14,221 17,494

Provision for the Year 60,942 45,573 24,328 28,833

Expected Return on Plan Assets (343) (16,777) (343) (12,319)

60,599 28,796 23,985 16,514

Net Actuarial (Gains)/Losses (30,910) 58,440 (7,440) 39,228

(30,910) 58,440 (7,440) 39,228

27.3 Present Value of Net Obligations


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Fair Value of Plan Assets 56,142 47,272 3,355 3,115

Present Value of Funded Obligations (236,780) (238,982) (130,745) (130,618)

Present Value of Net Obligations (180,638) (191,710) (127,390) (127,503)

27.4 Present Value of the Unfunded Obligations

Consolidated

As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Movement in Present Value of Unfunded Obligations


Acquisition of Subsidiaries - 10,683

Provision for the year 14,718 17,310

87,379 94,280

Gratuity Paid (13,775) (32,311)

Actuarial (Gains)/Losses (863) 10,692

Present value of Defined Benefit Obligations 72,741 72,661



Consolidated

As at 31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Expenses Recognised in the Statement of Comprehensive Income

Current Service Cost 13,662 10,278

Interest on Obligations 1,056 7,032

Provision for the year 14,718 17,310

Net Actuarial (Gains)/Losses (863) 10,692

13,855 28,002

Consolidated

(i) The retirement benefit obligations as at 31st March 2019 for Marawila Resorts PLC, Sigiriya Village Hotels PLC, Beruwala Resorts PLC and C.W.Mackie PLC are based on actuarial valuation carried out by Messrs. Piyal S. Goonethilleke and Associates as per which liability as at 31st March 2019 were Rs. 8.5 Million, Rs. 15.8 Million, Rs. 14.3 Million and Rs. 42 Million respectively.

ii) JF Packaging Ltd. The retirement benefit obligations as at 31st March 2019 is based on actuarial valuation carried out by Messrs. Actuarial and

Management Consultants (Private) Ltd. as per which liability as at 31st March 2019 was Rs.12.85 Million.

iii) LKAS 19 - ‘Employee benefit’ requires to apply Project Credit Unit method to make a reliable estimate of the retirement benefit obligation in order to determine the present value of the retirement benefit obligation. The key assumptions made in arriving at the retirement benefit obligation as at 31st March 2019 in respect of following companies are stated below:

Company Name

Expected SalaryIncrement Rate

DiscountRate

Liabilityas at

31.03.2019Rs. Million

Lankem Ceylon PLC 10% 11.5% 130.74 Marawila Resorts PLC 7.5% 11.5% 8.46 Sigiriya Village Hotels PLC 7.5% 11.5% 15.80 C.W. Mackie PLC 11.5% 9.1% 95.27 Beruwala Resorts PLC 7.5% 10.5% 8.67 BOT Hotel Services (Pvt) Ltd 10.5% 12.5% 5.65 Lankem Consumer Products Ltd. 10% 11.5% 0.60 SunAgro Farms Ltd. 10% 11.0% 0.27 SunAgro LifeScience Ltd. 10% 11.5% 2.24 Galle Fort Hotels (Pvt) Ltd. 10% 11.5% 4.67 Ceylon Tapes (Pvt) Ltd. 10% 11.5% 5.26 SunAgro Foods Ltd. 10% 11.5% 0.21 Lankem Paints Ltd. 10% 11.5% 6.48 JF Packaging Ltd. 10% 11.5% 12.85 Lak Kraft Ltd. 10% 11.5% 0.47 Sherwood Holidays Ltd. 10% 11.5% 1.10 Alliance Five (Pvt) Ltd 10% 11.5% 6.46 Kiffs (Private) Ltd. 10% 11.5% 4.18


27.5 Sensitivity of assumptions employed in actuarial valuationReasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

2019 2018

Consolidated Increase Rs.’000

Decrease Rs.’000

Increase Rs.’000

Decrease Rs.’000

Movement by 1%

Discount Rate (59,569) 74,458 (20,836) 29,144

Future salary scale 74,153 (43,363) 29,624 (20,477)

2019 2018

Company Increase Rs.’000

Decrease Rs.’000

Increase Rs.’000

Decrease Rs.’000

Movement by 1%

Discount Rate (4,486) 12,169 (5,890) 13,287

Future salary scale 12,222 (4,486) 13,303 (6,043)

28. TRADE AND OTHER PAYABLESConsolidated Company

As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Trade Payables 1,701,285 1,411,550 834,752 558,155

Other Payables 392,165 220,711 97,572 85,300

Accrued Expenses 557,165 679,110 283,844 273,650

ESC Payable 5,444 7,245 4,067 5,500

Unclaimed Dividend 15,824 14,142 7,453 7,453

NBT Payable 14,324 19,583 64 5,222

VAT Payable 51,153 126,348 - 31,616

Advance Received 180,275 68,248 - -

Other Levies Payable 14,433 12,696 - -

2,932,068 2,559,633 1,227,752 966,896



29. RELATED PARTY TRANSACTIONS

29.1 Amounts Due from Related Parties


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

a. Amounts due from Related Parties – Trade

Subsidiaries

SunAgro Foods Ltd. - - 715 715

C.W. Mackie PLC - - 20 20

SunAgro LifeScience Ltd - - 1 -

Ceylon Tapes (Private) Ltd - - 242 -

Beruwala Resorts PLC - - 253 3,348

Marawilla Resorts PLC - - 329 3,891

BOT Hotel Services (Pvt) Ltd - - 341 756

Sigiriya Village Hotels PLC - - - 422

Kiffs (Pvt) Ltd - 16 -

Lak Kraft (Pvt) Ltd - - 30 12

- - 1,947 9,164


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

b. Amounts due from Related Parties – Non-trade

Subsidiaries

Associated Farms (Pvt) Ltd. - - 19,886 19,853

Lankem Consumer Products Ltd. - - 157,338 157,074

Colombo Fort Hotels Ltd. - - 472,725 409,410

JF Packaging Ltd - - 12,691 4,836

SunAgro Foods Ltd. - - 64,978 44,176

SunAgro Farms Ltd. - - 892 883

Lankem Exports (Pvt) Ltd - - 168 99

Ceylon Tapes (Private) Ltd - - 437 14,012

Galle Fort Hotels (Pvt) Ltd. - - 500 -

Nature's Link Ltd. - - 2,868 2,332

Lankem Research Ltd. - - 1,200 1,025

- - 733,683 653,700

Less : Provision for Impairment

Debts - Related Parties (29.1.1) - - (266,482) (221,818)

- - 467,201 431,882



As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Affiliates

E.B. Creasy & Company PLC 934 1,412 191 138

Darley Butler & Co Ltd. 4,555 892 3,893 775

Lankem Developments PLC 16,894 11,249 16,891 11,249

Lankem Tea & Rubber Plantations (Pvt) Ltd. 25 25 - -

Waverly Power (Pvt) Ltd. - 451 - 451

Kotagala Plantations PLC 12,935 2,935 12,257 2,257

Agarapatana Plantations Ltd. 12,117 1,173 12,117 1,173

The Colombo Fort Land & Building PLC - 55,033 - -

York Hotel Management Services Ltd. 59,742 43,298 - -

Ceylon Trading Company Ltd. 162 - - -

Union Commodities (Pvt) Ltd 19,178 5,843 - -

Lanka Special Steels Ltd 16 225 16 225

Candy Delights Ltd 6,317 2,107 - 2,107

Colombo Fort Group Services (Pvt) Ltd - 15 - 15

Duramedical Lanka Ltd 151 151 151 151

Carplan Ltd - 61 - 61

Sunquick Lanka (Pvt) Ltd - 116,245 - -

Colonial Motors (Pvt) Ltd 120,178 - - -

The Colombo Fort Land & Building PLC 66,719 - 98 -

Ceytape (Pvt) Ltd 10,834 - - -

330,757 241,115 45,614 18,602

Less: Provision for Impairment

Related Parties (Note 29.1.1) (457) (71) (386) -

330,300 241,044 45,228 18,602

Total amounts due from Related Parties 330,300 241,044 512,429 450,484

29.1.1 Provision for Impairment – Related Parties


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Subsidiaries

Lankem Consumer Products Ltd. - - 157,338 157,074

Associated Farms (Pvt) Ltd. - - 19,886 19,853

SunAgro Foods Ltd. - - 65,693 44,891

SunAgro Farms Ltd. - - 892 -

Lankem Exports (Pvt) Ltd - - 168 -

Nature's Link Ltd - - 2,868 -

Lankem Research Ltd. - - 1,200 -

Colombo Fort Hotels Ltd. - - 18,019 -




As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Galle Fort Hotels (Private) Ltd - - 6 -

J.F.Packaging Ltd - - 396 -

Ceylon Tapes (Private) Ltd - - 1 -

Beruwala Resorts PLC - - 4 -

Lakkraft (Pvt) Ltd - - 7 -

Marawilla Resorts PLC - - 4 -

- - 266,482 221,818

Affiliates

Darley Butler & Co Ltd. 43 43 - -

Lankem Tea & Rubber Plantations (Pvt) Ltd. 25 25 - -

Agarapatana Plantations Ltd 321 - 321 -

Lankem Developments PLC 68 3 65 -

457 71 386 -

457 71 266,868 221,818

29.2 Loans due from Related Parties


As at31.03.2019

Rs.’000 31.03.2018

Rs.’000 31.03.2019

Rs.’000 31.03.2018

Rs.’000

The Colombo Fort Land & Building PLC 85,000 85,000 - -

Colombo Fort Hotels Ltd. - - 55,000 55,000

Lankem Developments PLC 30,700 30,700 30,700 30,700

Receivable after one year 115,700 115,700 85,700 85,700

Provisions for Impairment

Colombo Fort Hotels Ltd - - (2,096) -

Lankem Developments PLC - - (119) -

115,700 115,700 83,485 85,700


29.3 Movement in provision of impairment - Related PartiesThe Company has made a provision for impairment of Rs. 25.4 Million on amounts due from Related Companies as at 31st March 2019 due to adverse operational results of those related Companies This has resulted in continuous operating losses and negative operating cash flows in Related Companies and adjusted net asset basis has been considered as the recoverable amount for the calculation of provision for impairment as at the reporting date.


As at31.03.2019

Rs.’000 31.03.2018

Rs.’000 31.03.2019

Rs.’000 31.03.2018

Rs.’000

Balance as at 1st April under LKAS 39 71 71 221,818 177,817

Adjustment on initial application of SLFRS 9 - - 19,642 -

Balance as at 1st April under SLFRS 9 71 71 241,460 177,817

Measurement of loss allowance for the year 583 - 25,605 44,001

Reversal of impairment loss (197) (197)

Balance as at 31st March 457 71 266,868 221,818

29.4 Amounts Due to Related Parties

(a) Amounts due to Related Parties – Trade


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Subsidiaries

SunAgro LifeScience Limited - - - 3,405

Ceylon Tapes (Pvt) Ltd - - - 5,843

JF Packaging (Pvt) Ltd. - - 2,308 1,107

- - 2,308 10,355

(b) Amounts due to Related Parties - Non Trade


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Subsidiaries

Sigiriya Village Hotels PLC - - 17,714 11,268

Lankem Technology Services Ltd. - - 4,613 4,668

Lankem Chemicals Ltd. - - 53,930 54,159

Lankem Paints Ltd. - - 17,687 18,043

SunAgro LifeScience Ltd. - - 143,386 81,849

- - 237,330 169,987




As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019Rs. ‘000

31.03.2018Rs. ‘000

Affiliates

York Hotel Management Services Ltd. 53,958 35,384 - 7,171

Kotagala Plantations PLC 7,869 8,000 - -

Agarapatana Plantation Ltd. 11,461 12,736 53 53

Lankem Development PLC 5,175 3,730 - -

Lankem Tea & Rubber Plantations (Pvt) Ltd 10 896 10 10

E.B. Creasy & Company PLC 28,750 24,103 28,340 24,013

Carplan Ltd. 813 14 512 -

Colonial Motors PLC 15 275 - -

The Colombo Fort Land & Building PLC 112,919 109,710 38,909 44,145

Waverly Power (Pvt) Ltd. 53,371 145 51,498 -

E.B. Creasy Logistic (Pvt) Ltd. 11,549 3,476 11,549 3,476

Darley Butler & Co Ltd. 180 169 - -

KIA Motors (Lanka) Ltd. 115 - - -

York Arcade Holdings PLC - 500 8,032 -

CM Holdings PLC 507 332 507 332

Union Commodities (Pvt) Ltd 55,094 86,196 20,014 20,940

Laxapana Batteries PLC - 15 - 15

Colombo Fort Group Services (Pvt) Ltd 2,496 2,091 1,622 146

Sunquick Lanka (Pvt) Ltd. 546,584 313,067 - -

890,866 600,839 161,046 100,301

Total amounts due to Related Parties 890,866 600,839 398,376 270,288

29.5 Transactions with Related PartiesThe Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard 24 - Related Party Disclosure, the details of which are reported below:


For the year Ended 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Subsidiaries

(Purchases)/Sale of Goods - - 14,091 3,737

(Reimbursement)/ Charging of Expenses - - 89,367 92,075

Fixed Asset Transfers - - (33) (396)

(Receipt)/Payment of Outstanding Balances - - (87,239) (142,927)

Interest (Expenses)/Income - - 69,335 42,776

Settlement of Loan (Obtained) / Granted - - 135,000 (170,813)

Loans (Granted) / Obtained - - (186,074) 141,199



For the year Ended 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Associates

(Receipt)/Payment of Outstanding Balances (59,456) (6,131 (59,456) (6,131)

Interest (Expenses)/Income 2,468 7,406 5,642 7,753

(Reimbursement)/ Charging of Expenses 10 60 10 60

Settlement of Loan (Obtained) / Granted - (12,982) - -

Loans (Granted) / Obtained - 12,544 - -

Dividend 7,497 - 7,497 -

Joint Venture

(Receipt)/Payment of Outstanding Balances 1,251,113 608,719 - -

(Reimbursement)/ Charging of Expenses 118,154 223,629 - -

(Purchases)/Sale of Goods (1,632,067) (998,565) - -

Asset Transfer - 271,270 - -

Investment related transactions - (307,840) - -

Affiliates

(Purchases)/Sale of Goods (232,757) (203,481) (24,437) 45,546

(Receipt)/Payment of Outstanding Balances 223,083 324,674 5,305 25,108

(Reimbursement)/ Charging of Expenses 34,402 18,457 38,921 (15,683)

Rent Income 3,406 2,139 - -

Management Fees (53,236) (81,662) - -

Interest (Expenses)/Income (4,837) (30,434) (7,169) (31,687)

Settlement of Loan (Obtained) / Granted (140,000) (559,681) (150,000) (545,237)

Loans (Granted) / Obtained 203,000 280,000 83,000 275,000

Write Off 15 - 15 -

Advance payments for purchases 101,809 - - -

Key Management Personnel(Receipt)/Payment of Outstanding Balances - - - -

Except for the following transactions, there were no non-recurrent related party transactions entered in to by the Company during the financial year, the value of which exceeded 10% of shareholders equity or 5% of the total assets of the group or recurrent related party transactions the value of which exceeded 10% of gross revenue of the group during the year ended 31st March 2019.

Name of the Related Party

Relationship Value of the related party transactions

Rs.

Value of the related party transactions as a % of Equity and as a % of Total Assets

Terms and Conditions The rational for entering into the transactions.

E.B. Creasy & Company PLC

Related Party 250,000,000 24% of Total Equity3% of Total Assets

Obtaining the corporate gurantee subject to commission of 2% per annum.

To secure working capital facilities from a bank.

J.F.Packaging Ltd. Wholly owned Subsidiary

325,000,000 24% of Total Equity 4% of Total Assets

Providing the corporate guarantee subject to commission of 2% per annum.

To enable subsidiary to obtain banking Facilities to fund its working capital requirements.



Setting off the receivable balance against payable balance.

Restructure of inter company payables and receivables.



29.6 Terms and Conditions of Transactions with Related PartiesTransactions with related parties are carried out in the ordinary course of the business at commercial rates. Outstanding balances at the end of the year are unsecured. Interest on outstanding balances has been charged at the prevailing market rate (unless otherwise stated).

29.7 Transactions with Key Management PersonnelAccording to Sri Lanka Accounting Standard 24 - Related Party Disclosures, Key Management Personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, Key Management Personnel include the members of the Board of Directors of Lankem Ceylon PLC and its subsidiary companies.

(a) Loans to Key Management PersonnelNo loans have been given to Key Management Personnel during the year.

(b) Key Management Personnel CompensationDetails of compensation for Executive and Non-Executive Directors are disclosed below:


As at 31.03.2019 Rs.’000

31.03.2018 Rs.’000

31.03.2019 Rs.’000

31.03.2018 Rs.’000

Short-term Employee Benefits 129,540 142,972 93,245 99,916

(c) Key Management Personnel Shareholding of the CompanyThe shareholdings of the Directors are disclosed on page 11 of this Annual Report.

(d) Transactions with close family membersThere were no transactions with close family members during the year.

29.8 The Directors of the Company are also Directors of the following companies:Name of the Company Relationship Name of the Director

Mr.

A. R

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Lankem Ceylon PLC - √ √ √ √ √ √ √ √ √ √ √ √ √

The Colombo Fort Land & Building PLC Parent √ √ √ √ √

Associated Farms (Pvt) Ltd. Subsidiary √ √

B.O.T. Hotel Services (Pvt) Ltd. Subsidiary √ √

Beruwala Resorts PLC Subsidiary √ √

C.W. Mackie PLC Subsidiary √ √ √

Ceylon Tapes (Pvt) Ltd Subsidiary √ √ √ √ √ √ √ √

Colombo Fort Hotels Ltd Subsidiary √ √ √

Galle Fort Hotels (Pvt) Ltd. Subsidiary √ √

JF Packaging Limited Subsidiary √ √ √ √ √ √ √ √


Name of the Company Relationship Name of the Director

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A. R

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Lankem Chemicals Ltd. Subsidiary √ √ √ √ √

Lankem Consumer Products Ltd. Subsidiary √ √ √ √ √

Lankem Exports (Pvt) Ltd. Subsidiary √ √ √

Lankem Paints Ltd. Subsidiary √ √ √ √ √

Lankem Research Ltd. Subsidiary √ √ √ √ √

Lankem Technology Services Ltd. Subsidiary √ √ √

Marawila Resorts PLC Subsidiary √ √

Nature's Link Ltd. Subsidiary √ √ √ √ √

Sigiriya Village Hotels PLC Subsidiary √ √

SunAgro Farms Ltd. Subsidiary √ √ √ √

SunAgro Foods Ltd. Subsidiary √ √ √ √ √

SunAgro LifeScience Ltd. Subsidiary √ √ √ √ √ √

Sherwood Holidays Ltd. Subsidiary √ √

Agarapatana Plantations Ltd Related √ √

Carplan Ltd Related √ √

CM Holdings PLC Related √ √ √

Colombo Fort Investments PLC Related √ √

Colonial Motors (Ceylon) Ltd. Related √ √ √

Consolidated Rubber Plantations PTE Ltd Related √

Candy Delights Ltd Related √ √ √ √ √

Darley Butler & Co Ltd Related √ √ √ √ √

E.B. Creasy & Company PLC Related √ √ √ √ √

E.B. Creasy Logistics Ltd. Related √ √ √

Financial Trust Ltd. Related √ √

Island Consumer Supplies (Pvt) Ltd. Related √ √ √

KIA Motors (Lanka) Ltd. Related √ √

Kotagala Plantations PLC Related √ √

Lankem Developments PLC Related √ √ √ √ √ √

Lankem Tea & Rubber Plantations (Pvt) Ltd. Related √ √ √

Laxapana Batteries PLC Related √ √ √

Union Commodities (Pvt) Ltd. Related √ √

York Arcade Holdings PLC Related √ √

York Hotel Management Services Ltd. Related √

Consolidated Tea Plantation Ltd Associate √ √

Waverly Power (Pvt) Ltd. Associate √ √ √



y Mr. M.M.A.R.P. Goonetileke resigned from the Board of Lankem Ceylon PLC with effect from 30th June 2018.

y Mr. A. Rajaratnam resigned from the Boards of Colombo Fort Hotels Ltd and Sherwood Holidays Ltd on 15th May 2018, Waverly Power (Pvt) Ltd on 16th May 2018, Darley Butler & Company Ltd, and Candy Delights Ltd on 31st May 2018, Carplan Ltd and KIA Motors (Lanka) Ltd on 12.03.2019, C.W Mackie PLC on 19.03.2019, Colonial Motors (Ceylon) Ltd, Beruwala Resorts PLC, Sigiriya Village Hotels PLC, Marawila Resorts PLC and Lankem Ceylon PLC on 31.03.2019 and Lankem Developments PLC on 20.06.2019.

y Mr. S.D.R Arudpragasam resigned from the Boards of Carplan Limited and KIA Motors (Lanka) Ltd on 29.07.2019.

y Mr. Anushman Rajaratnam was appointed to the Boards of Marawila Resorts PLC, Beruwala Resorts PLC and Sigiriya Village Hotels PLC on 10.04.2019 and Lankem Developments PLC on 20.06.2019.

30. FINANCIAL INSTRUMENTS

30.1 Financial Risk ManagementThe Group has exposure to the following risks from its use of Financial instruments:

1. Credit Risk

2. Liquidity Risk

3. Market Risk (including currency risk and interest rate risk)

This note represents qualitative and quantitative information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and procedures for measuring and managing risk.

Risk Management FrameworkThe Board of Directors have overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risk faced by the Group, to set appropriate risk limits and controls, and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

30.1.1 Credit Risk

Credit risk is the risk of Financial loss to the Group if a customer or counter party to a Financial instrument fails to meet its contractual obligation, and arises principally from the Group’s receivables from customers, investments in debt securities.

The Group’s credit exposure is closely monitored. Credit given is reviewed with the predetermined approval procedures and contractual agreement made for every high value transaction. The carrying amount of financial assets represents the maximum credit exposure.

Note Consolidated CompanyAs at 31.03.2019

Rs.’000 31.03.2018

Rs.’000 31.03.2019

Rs.’000 31.03.2018

Rs.’000

Trade & Other Receivables 19 4,294,255 4,479,372 819,009 1,054,717

Amounts Due from Related Parties - Trade 29.1 - - 1,947 9,164

Amounts Due from Related Parties - Non - Trade 29.1 330,300 241,044 512,429 450,484

Loans Due from Related Parties 29.2 115,700 115,700 83,485 85,700

Cash and Cash Equivalents 20 481,608 1,199,843 36,538 751,282

5,221,863 6,035,959 1,453,408 2,351,347


The aging of Trade & Other Receivables, Amounts Due from Related Parties (Trade & Non-Trade) and Loans Due from Related Parties at the reporting date as follows;


As at 31.03.2019 31.03.2018 31.03.2019 31.03.2018

GrossRs. ‘000

ImpairmentRs. ‘000

GrossRs. ‘000


GrossRs. ‘000


GrossRs. ‘000


Past due 0-365 days 4,645,717 351,462 4,794,367 314,995 1,001,346 180,390 1,199,587 135,706

More than one year 446,457 457 356,815 71 864,997 269,083 758,002 221,818

5,092,174 351,919 5,151,182 315,066 1,866,343 449,473 1,957,589 357,524


The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, the Management also considers the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. However, geographically there is no concentration of credit risk.

The Group establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables. The main components of this allowance are specific loss component that relates to individually significant exposures, and a collective loss component established for group of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics of those receivables and future macro-economic conditions.

Amounts due from related companies

The amounts due from related parties mainly consist of receivables from associates and other related ventures and those are closely monitored by the group.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each related company.

Balances with Bank

The Group held balance with Banks of Rs. 481.6 Mn as at 31st March 2019 (Rs. 1,200 as at 31st March 2018) which represent its maximum credit exposure on these assets.

30.1.2 Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligation associated with its financial liabilities that are settled by delivering cash or any other financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.



The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding netting agreements.

Consolidated CompanyAs at 31st March 2019 Carrying

AmountRs. ‘000

ContractualCash Flows

Rs. ‘000

Less thanOne yearRs. ‘000

More thanOne yearRs. ‘000

CarryingAmountRs. ‘000


Rs. ‘000



Non-Derivative Financial Liabilities

Term Loans/Finance Obligations/Debentures 7,585,872 7,586,182 3,620,201 3,965,671 3,718,912 3,718,912 1,437,663 2,281,249

Loans, Trade & Non-Trade Amounts due to Related Companies 1,106,010 1,106,010 1,106,010 - 548,774 548,774 548,774 -

Other Financial Liabilities

Trade & Other Payables 2,932,068 2,932,068 2,932,068 - 1,227,752 1,227,752 1,227,752 -

Bank Overdrafts 986,015 986,015 986,015 - 518,053 518,053 518,053 -

12,609,967 12,610,275 8,644,440 3,965,834 6,013,491 6,013,491 3,732,242 2,281,249


As at 31st March 2018CarryingAmountRs. ‘000


Rs. ‘000



CarryingAmountRs. ‘000


Rs. ‘000



Non-Derivative Financial Liabilities

Term Loans/Finance Obligations/Debentures 7,583,518 7,586,753 4,979,182 2,607,571 4,139,956 4,139,956 2,603,335 1,536,621

Loans, Trade & Non-Trade Amounts due to Related Companies 758,983 758,983 758,983 - 412,807 412,807 412,807 -


Trade & Other Payables 2,559,633 2,559,633 2,599,633 - 966,896 966,896 966,896 -

Bank Overdrafts 1,401,975 1,401,975 1,401,975 - 778,424 778,424 778,424 -

12,304,109 12,307,344 9,699,773 2,607,571 6,298,083 6,298,083 4,761,462 1,536,621

30.1.3 Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, etc. will affect the Group’s income or the value of its holdings of Financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the returns.

301.3.1 Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has exposure to foreign currency risk where it has cash flows in overseas operations and foreign currency transactions which are affected by foreign exchange fluctuations.


Sensitivity Analysis

The following table demonstrates the sensitivity to a reasonably possible change in the USD/LKR exchange rate, with all other variables held constant, of the Group’s profit before tax due to changes in the fair value of the Group’s forward exchange contracts. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period.

Strengthening/(Weakening)in exchange rate USD

Effect on Profit before Tax

ConsolidatedRs.‘000

CompanyRs.‘000

As at 31st March 2019 +10% (136,136) (54,945)

-10% 136,136 54,945

As at 31st March 2018 +10% (51,497) (16,464)

-10% 51,497 16,464

30.1.3.2 Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The exposure to the risk of change in market interest rates relates primarily to the Group’s long-term debt obligation and investment with floating interest rates.

The Group and Company are exposed to changes in market interest rates through bank overdraft and other bank borrowings which were borrowed at a variable interest rate. The Group has option not to mitigate its interest rate risk in the case that the market interest rate were to be lower than the fixed interest rate that the Group has already commited to. However, the Group utilises various Financial Instruments to manage exposure to interest rate risk arising due to finanacial instruments.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the profit before tax.

As at Increase/(Decrease) in basis points Rupee Borrowings

Effect on Profit or Loss before TaxConsolidated Company

As at 31st March 2019 +100 decrease 51,723 33,163

-100 increase (51,723) (33,163)

As at 31st March 2018 -100 decrease 56,999 37,770

-100 increase (56,999) (37,770)

30.2 Fair Value Hierarchy

The table below analyses financial instruments carried at fair value by valuation method. Fair value disclosures are given below.

The different levels have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical Assets or Liabilities

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the Asset or Liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices)

Level 3: Inputs for the Asset or Liability that are not based on observable market data (unobservable inputs)



31st March 2019


Level 1Rs. ‘000

Level 2Rs. ‘000

Level 3Rs. ‘000

Level 1Rs. ‘000

Level 2Rs. ‘000

Level 3Rs. ‘000

Investments Classified as Financial Assets FVTOCI 17,779 - 24,198 15,598 - 23,948

Investments Classified as Financial Assets FVTPL 33,015 - - 33,015 - -

50,794 - 24,198 48,613 - 23,948

31st March 2018


Level 1Rs. ‘000

Level 2Rs. ‘000

Level 3Rs. ‘000

Level 1Rs. ‘000

Level 2Rs. ‘000

Level 3Rs. ‘000

Investments Classified as Available for Sale 29,653 - 34,533 26,874 - 34,283

Investments Classified as FVTPL 68,411 - - 68,411 - -

98,064 - 34,533 95,285 - 34,283

30.3 Accounting Classifications and Fair Value

The value of financial assets and liabilities, together with carrying amounts shown in the financial statements of financial position as follows:

Group

As at 31st March 2019

Financial Assets at Fair Value

through Profit or Loss

Rs.000

Financial Assets at

Amortised cost

Rs.000


through Other Comprehensive

Income Rs.000

Financial Liabilities at

Amortised Cost

Rs.000

Total Carrying Amount

Rs.000

Fair Value

Rs.000

AssetsBank & Cash Balances - 490,471 - - 490,471 490,471

Trade & Other Receivables - 4,294,255 - - 4,294,253 4,294,253

Investments Classified as Fair Value through Profit or Loss 33,015 - - - 33,015 33,015

Investments Classified as Available for Sale /FV through OCI - - 41,977 - 41,977 41,977

Amounts due from related parties 446,000 - - 446,000 446,000

33,015 5,230,724 41,976 - 5,305,716 5,305,715

LiabilitiesInterest Bearing Borrowings - - - 7,585,872 7,585,872 7,585,872

Trade and Other Payables - - - 2,932,068 2,932,068 2,932,068

Bank Overdrafts - - - 986,015 986,015 986,015

Amounts due to related parties - - - 1,106,010 1,106,010 1,106,010

- - - 12,609,965 12,609,965 12,609,965


Group


Fair Value through Profit or

Loss Rs.000

Held to Maturity

Rs.000

Loans & Receivables

Rs.000

Available for Sale

Rs.000


Rs.000


Rs.000

Fair Value

Rs.000

Bank & Cash Balances - - 1,210,568 - - 1,210,568 1,210,568



Investments Classified as Available for Sale - - 64,186 - 64,186 64,186

Amounts due from related parties 356,744 356,744 356,744

68,411 - 6,046,684 64,186 - 6,179,281 6,179,281

Interest Bearing Borrowings - - - - 7,583,518 7,583,518 7,583,518

Trade and Other Payables - - - - 2,559,633 2,559,633 2,559,633

Bank Overdrafts - - - - 1,401,975 1,401,975 1,401,975

Amounts due to related parties - - - - 758,983 758,983 758,983

- - - - 12,304,109 12,304,109 12,304,109

Company



through Profit or Loss

Rs.000

Financial Assets at Amortised

cost

Rs.000


through Other Comprehensive

Income Rs.000

Financial Liabilities at

Amortised Cost

Rs.000


Rs.000

Fair Value

Rs.000

Bank & Cash Balances - 37,484 - - 37,484 37,484

Trade & Other Receivables - 819,009 - - 819,009 819,009


Investments Classified as FV through OCI/ Available for Sale - - 39,546 - 39,546 39,546

Amounts due from related parties - 597,861 - - 597,861 597,861

33,015 1,454,354 39,546 - 1,526,915 1,526,915

Interest Bearing Borrowings - - - 3,718,912 3,718,912 3,718,912

Trade and Other Payables - - - 1,227,752 1,227,752 1,227,752

Bank Overdrafts - - - 518,053 518,053 518,053

Amounts due to related parties - - - 548,774 548,774 548,774

- - - 6,013,491 6,013,491 6,013,491



Company


Fair Value through Profit or

Loss Rs.000

Held to Maturity

Rs.000

Loans & Receivables

Rs.000

Available for Sale

Rs.000


Rs.000


Rs.000

Fair Value

Rs.000

Bank and Cash Balances - - 753,696 - - 753,696 753,696



Investments Classified as Available for Sale - - 61,157 - 61,157 61,157

Amounts due from related parties - 545,348 - 545,348 545,348

68,411 - 2,353,761 61,157 - 2,483,329 2,483,329

Interest Bearing Borrowings - - - - 4,139,956 4,139,956 4,139,956

Trade and Other Payables - - - - 966,896 966,896 966,896

Bank Overdrafts - - - - 778,424 778,424 778,424

Amounts due to related parties - - - - 412,807 412,807 412,807

- - - - 6,298,083 6,298,083 6,298,083

31 COMMITMENTS

31.1 CompanyThe Company had no material capital or financial commitments as at the date of the Statement of Financial Position.

31.2 ConsolidatedThe Group had no significant capital or financial commitments as at the date of the Statement of Financial Position.

32. CONTINGENT LIABILITIES

32.1 CompanyThere are no material contingent liabilities outstanding as at the date of the Statement of Financial Position other than those disclosed below;

Lankem Ceylon PLC has issued Corporate Guarantees for borrowings obtained by the related companies and letters of comfort as indicated below as at 31st March 2019.

Name of the Company Amount Rs. ‘000

Darley Butler & Co. Ltd. 130,000

Lankem Developments PLC 62,080

SunAgro Lifescience Ltd. 200,000

SunAgro Foods Ltd. 110,000

JF Packaging Limited 597,000

Agarapatana Planatations Limited 200,000

1,299,080

Comfort letters are provided for SunAgro Foods Ltd., SunAgro Farms Ltd., Lankem Consumer Products Ltd., Lankem Exports (Pvt) Ltd., Lankem Research Limited, Lankem Technology Services Ltd., Lankem Chemicals Ltd., Lankem Paints Ltd. and Nature’s Link Limited by Lankem Ceylon PLC.


32.2 Consolidated

(i) C.W. Mackie PLC

The following contingent liabilities exist as at the reporting date on account of the letters of comfort and guarantees given by the Company:

Letters of comfort and guarantees provided on behalf of the subsidiaries are as follows.

Name of the Company Amount Rs. Million

2019 2018

Ceymac Rubber Company Ltd. 99 99

Ceytra (Pvt) Ltd 8 8

Kelani Velley Canneries Limited 90 90

197 197

These corporate guarantees have been provided for Hatton National Bank PLC and Commercial Bank of Ceylon PLC on behalf of the subsidiary companies Ceymac Rubber Company Limited, Ceytra (Private) Limited and Kelani Valley Canneries Limited for short term loan facilities, where repayment terms are less than 12 months.

There are no material contingent liabilities outstanding as at the reporting date other than as disclosed above which requireadjustments to or disclosures in Financial Statements.

33. GOING CONCERNThe Group and the Company has incurred a loss of Rs. 884 Million and Rs. 565 Million respectively for the year ended 31st March 2019. Further, the Group and the Company has reported accumulated losses of Rs. 381 Million and Rs. 491 Million respectively and current liabilities exceed the current assets by Rs. 971 Million and Rs. 1,510 Million respectively as at 31st March 2019. However, the management envisage that implementation of new strategic plan focusing on core-business of the company and expansion of operations of subsidiaries will help to establish long term sustained profitability in the business sectors in which the Group and the Company operates. Thus, the Directors are of the view that the Group and the Company is able to continue as going concern in foreseeable future and accordingly, the consolidated financial statements are prepared on going concern basis.

34. EVENTS OCCURRING AFTER THE REPORTING PERIOD

34.1 CompanyThe land loacted at Kandathoduwawa Puttlam, which was held for sale at 31st March 2019 was subsequently sold during June 2019.

34.2 Consolidation(i) The Directors of C. W. Mackie PLC have recommended the payment of a first and final dividend of Rs. 3.50 per ordinary share

amounting to Rs. 125 Million for the year ended 31st March, 2019 for approval by the shareholders at the Annual General Meeting held on 27th June 2019. In Accordance with the Sri Lanka Accounting Standard 10 (LKAS 10) “ Events after the reporting period“, this proposed Dividend has not been recognized as a liability as at 31st March 2019.

Subsequent to the reporting period, no circumstances have arisen that would require adjustments to/or disclosure in the financial statements other than those disclosed above.



35. SUBSIDIARY COMPANIES OF THE GROUPDetails of subsidiaries in which Lankem Ceylon PLC held an indirect interest are set out below:

Indirect Subsidiary EffectiveHolding (%)

York Hotels (Kandy) Ltd. 39.63

B.O.T Hotel Services (Pvt) Ltd. 57.82

Ceymac Rubber Company Ltd. 54.63

Ceytra (Pvt) Ltd. 34.77

Kelani Vallye Canneries Limited 48.83

SunQuick Lanka Properties (Pvt Ltd 28.22

Galle Fort Hotel (Pvt) Ltd. 69.11

Lak Kraft (Pvt) Ltd. 69.11

Sherwood Holidays Ltd. 69.11

Ceylon Tapes Ltd. 100.00

Kiffs (Pvt) Ltd. 100.00

Alliance Five (Pvt) Ltd 100.00

36. NON-CONTROLLING INTERESTS IN SUBSIDIARIESMarawila Resorts PLC Colombo Fort

Hotels Ltd.C.W. Makies PLC Other Individually

Immaterial Subsidiaries2019

Rs. ‘0002018

Rs. ‘0002019

Rs. ‘0002018

Rs. ‘0002019

Rs. ‘0002018

Rs. ‘0002019

Rs. ‘0002018

Rs. ‘000

Total assets 1,909,820 1,615,107 2,498,540 2,476,808 5,736,091 4,553,795 4,667,175 6,589,531

Total liabilities 748,578 692,305 850,711 767,297 2,792,951 2,173,736 1,479,552 3,125,073

Net assets 1,161,242 922,802 1,647,829 1,709,511 2,943,140 2,380,059 3,187,624 3,464,458

Carrying amount of NCI 698,321 551,203 (219,316) (201,895) 936,591 687,092 1,377,679 1,093,258

Revenue 456,637 444,535 - - 9,695,319 9,272,290 1,244,332 3,260,118

Profit/(loss) after tax (14,358) (1,144) (60,216) (47,279) 216,470 236,455 106,832 (28,795)

Total comprehensive income 238,440 1,554 (60,184) (47,292) 608,633 221,231 1,000,411 (41,285)

Profit/(loss) allocated to NCI (8,680) (13,728) (17,431) (14,604) 74,359 124,664 50,036 9,921

Cash flows from operating activities 55,994 58,881 (4,878) 147,400 344,533 (86,316)

Cash flows from/(used in) investing activities (32,725) (27,942) 522 (147,022) (221,448) (187,526)

Cash flows from financing activities 13,458 (33,214) - - (84,530) 204,474

Dividend paid to NCI - - - - 66,575 56,254

NCI percentage (%) 60.45% 60.45% 30.89% 30.89% 44.66% 44.66%

Principal place of business Thalwilawella, Thoduwawa, Marawila.

8-5/2, Layden Bastian Road, York Arcade Building, Colombo 01.

No. 36, D. R. Wijewardena Mawatha, Colombo 10.

37. COMPARATIVE INFORMATION

37.1 Re-classificationsTo facilitate comparison and where relevant, balance pertaining to the previous year have been reclassified, as necessary.


Ten Year Summary

2018/19Rs.’ 000

2017/18Rs.’ 000

2016/17Rs.’ 000

2015/16Rs.’ 000

2014/15Rs.’ 000

2013/14Rs.’ 000

2012/13Rs.’ 000

2011/12Rs.’ 000

2010/11Rs.’ 000

2009/10Rs.’ 000

Statement of Profit or Loss

Revenue 17,659,156 18,479,195 17,261,207 17,073,999 15,221,745 15,563,475 24,046,619 24,158,766 23,030,604 11,046,103

Share of Profit / (Loss) of Associate (334,521) (97,602) (75,280) (217,950) (268,945) (65,773) - - - -

Share of Profit / (Loss) of Joint Venture 46,659 (20,697) - - - - - - - -

Profit/(Loss) Before Income Tax (1,049,956) (349,155) (613,132) (140,306) (260,499) (71,414) 801,700 1,025,104 2,108,564 803,582

Income Tax Expense 165,676 (127,949) (118,332) (114,274) (113,299) (144,226) (248,557) (299,950) (236,815) (255,000)

Profit/(Loss) for the Year (884,280) (477,104) (731,464) (254,580) (373,798) (215,640) 553,143 725,154 1,871,749 548,582 Profit Attributable to Non-Controlling Interests 98,284 106,253 58,272 179,232 (22,797) 141,059 439,984 248,801 740,643 191,274 Profit Attributable to Owners of the Company (982,564) (583,357) (789,736) (444,874) (351,001) (356,699) 113,159 476,353 1,131,106 357,308

Statement of Financial Position

Equity

Stated Capital 930,346 930,346 536,218 536,218 536,218 536,218 536,218 536,218 536,218 281,218

Capital Reserves 4,833 4,833 4,833 3,409 3,409 3,409 3,409 3,930 3,930 443,080

Available for Sale Reserve (4,706) 12,734 1,750 3,713 13,425 11,060 9,007 6,977 12,389 -

Revenue Reserves (380,822) 608,907 1,340,938 2,118,926 2,508,635 3,137,131 3,482,940 3,135,964 2,597,468 1,088,624

Revaluation Reserves 1,679,064 - - - - - - - - -

Non-Controlling Interests 2,793,360 2,129,658 2,237,370 2,609,592 2,376,717 2,348,838 2,270,684 3,542,850 3,484,748 1,898,619

Total Equity 5,022,075 3,686,478 4,121,109 5,271,858 5,438,404 6,251,920 6,477,163 7,225,939 6,634,753 3,711,541

Assets

Non-Current Assets 10,808,244 8,308,176 8,198,896 8,391,539 8,586,898 7,696,595 7,411,407 11,963,862 10,207,147 8,348,347

Current Assets 7,765,060 8,254,873 8,149,165 7,541,213 6,827,636 7,163,600 6,932,590 9,383,432 7,447,940 5,036,069

Total Assets 18,573,304 16,563,049 16,348,061 15,932,752 15,414,534 14,860,195 14,343,997 21,347,294 17,655,087 13,384,416

Liabilities

Non-Current Liabilities 4,814,961 3,084,613 2,820,406 1,687,142 2,329,142 1,476,009 1,547,309 5,450,131 5,301,551 4,684,213

Current Liabilities 8,736,268 9,791,958 9,406,546 8,973,752 7,599,195 7,347,530 6,494,430 8,671,224 5,718,783 4,988,661

Total Liabilities 13,551,229 12,876,571 12,226,952 10,660,894 9,928,337 8,823,539 8,041,739 14,121,355 11,020,334 9,672,874

Cash Flow StatementNet Cash Flow Generated from/ (Used in) Operating Activities (183,813) (151,346) 256,358 (559,568) 917,449 146,332 144,499 1,160,123 593,060 601,347 Net Cash Flow Generated from/ (Used in) Investing Activities (112,936) (75,404) (831,756) (340,790) (1,211,181) (573,837) (3,193,687) (2,085,613) (948,060) (1,665,322)Net Cash Flow Generated from/ (Used in) Financing Activities (7,388) 715,965 1,160,724 142,233 567,211 188,434 2,199,613 115,911 1,000,657 1,419,468 Net Increase/(Decrease) in Cash and Cash Equivalents (304,137) 489,215 585,326 (758,125) 273,479 (239,071) (849,575) (809,579) 645,657 355,493

Key Indicators

Earnings per Share (Rs.) (29.02) (25.45) (32.91) (17.96) (14.63) (14.86) 4.71 19.85 47.16 15.72

Dividend Per Share (Rs.) - - - - - - 1.50 2.50 2.50 2.25

Net Assets per Share (Rs.) 65.84 45.99 78.49 110.93 129.56 153.66 167.98 153.92 131.25 86.33

Market Capitalisation (Rs. Million) 745 1,263 1,056 1,920 2,474 2,400 3,468 4,320 9,636 1,365

Current Ratio (No.of Times) 0.89 0.84 0.87 0.84 0.90 0.97 1.07 1.08 1.30 1.01

Interest Cover (No.of times) 0.22 0.71 0.36 0.77 0.41 0.85 1.86 3.40 5.66 3.73

Price Earnings Ratio (No.of Times) (1.32) (1.49) (1.34) (4.45) (7.05) (6.73) 30.65 9.07 8.51 4.14

Return on Equity (%) (0.47) (22.43) (0.33) (0.05) (0.08) -9.14 2.69 12.93 35.91 19.71

Gearing (%) 65.84 72.55 68.24 60.35 55.25 49.45 45.61 52.18 46.16 54.63

Dividend Payout Ratio (%) - - - - - - 31.81 12.60 5.30 14.32

Notes:

1) The Statement of Financial Position for FY 2012/13 & FY 2013/14 is restated in line with SLFRS 10.2) The Statement of Profit or Loss for FY 2013/14 is restated in line with SLFRS 10.3) The Statement of Financial Position for FY 2010/11 & FY 2011/12 is restated in line with SLFRS/LKAS.4) The Statement of Profit or Loss for FY 2011/12 is restated in line with SLFRS/LKAS.5) The Starement of Proft or Loss for the year 2017/18 is reclassified will now SLFRS15.


Share Information

Twenty Major Shareholders31.03.2019 31.03.2018

Position Name No ofOrdinary

Shares

% No ofOrdinary

Shares

%

1. The Colombo Fort Land and Building PLC 15,000,000 44.31 15,000,000 44.312. E.B. Creasy & Company PLC 10,974,635 32.42 10,974,635 32.423. Associated Electrical Corporation PLC 1,507,877 4.45 1,507,877 4.454. Colombo Fort Investments PLC 966,300 2.85 965,000 2.855. Darley Butler & Company PLC 536,614 1.59 536,614 1.596. Seylan Bank PLC/ Dr. Thirugnanasambandar Senthilverl 431,427 1.27 422,360 1.257. Guardian Asset Management Ltd 400,300 1.18 400,300 1.188. Sri Lanka Insurance Corporation Ltd. - General Fund 306,169 0.90 306,169 0.909. Capital Investments Limited 274,000 0.81 274,000 0.8110. Acuity Partners (Pvt) Limited/Colombo Investment Trust PLC 225,000 0.66 225,000 0.6611. C M Holdings PLC 160,000 0.47 160,000 0.4712. Acuity Partners (Pvt) Limited/Colombo Fort Investments PLC 150,000 0.44 150,000 0.4413. A E C Properties (Pvt) Ltd. 150,000 0.44 150,000 0.4414. People's Leasing & Finance PLC/HI Line Trading (Pvt) Ltd 145,817 0.43 146,827 0.4315. Employees Trust Fund Board 82,283 0.24 82,283 0.2416. Bank of Ceylon No. 1 Account 72,400 0.21 72,400 0.2117. Mr Anthony Isidore De Silva and Mr. Francis Xavier Ranjith Pereira 55,047 0.16 55,047 0.1618. Mr. Mohottige Don Hemantha Mannapperuma 54,274 0.16 51,509 0.1519. Corporate Holdings (Private) Limited A/C No.01 48,377 0.14 48,377 0.1420. Colombo Investment Trust PLC 45,000 0.13 45,000 0.13

TOTAL 31,585,520 93.26 31,573,398 93.23

Public HoldingThe Percentage of Shares held by the public as at 31st March 2019 was 14.65% .(31.03.2018- 14.59%)

Public ShareholdersThe Number of Public Shareholders as at 31st March 2019 were 1,998 (31.03.2018 -1997)

The applicable option under CSE Rule 7.13.1 on minimum public holding is option 2 and the Float Adjusted Market Capitalization as of 31.03.2019 was Rs. 109.11Million.

Market ValueThe Market Value of an Ordinary Share of Lankem Ceylon PLC is given below:

As at 31.03.2019

Rs.

As at 31.03.2018

Rs.

Highest 44.90 65.00Lowest 18.10 35.40Last Traded Price 22.00 37.30(Volume weighted Average)


Distribution of Shares

No. of Shares Held

As At 31st March 2019 As as 31st March 2018

No. of Shareholders

Total Holdings % of Total Holdings

No. of Shareholders

Total Holdings % of Total Holdings

1 - 1,000 1,571 364,059 1.08 1,567 371,114 1.10

1,001 - 10,000 390 1,097,664 3.24 394 1,120,776 3.31

10,001 - 100,000 49 1,163,338 3.44 48 1,142,528 3.37

100,001 - 1,000,000 11 3,745,627 11.06 11 3,736,270 11.04

Over 1,000,000 3 27,482,512 81.18 3 27,482,512 81.18

2,024 33,853,200 100.00 2,023 33,853,200 100.00

Analysis of Ordinary Shareholders

No. of Shares Held

As At 31st March 2019 As as 31st March 2018

No. of Shareholders

Total Holdings %

No. of Shareholders

Total Holdings

%

Individuals 1,876 1,939,716 5.73 1,876 1,950,880 5.76

Institutions 148 31,913,484 94.27 147 31,902,320 94.24

2,024 33,853,200 100.00 2,023 33,853,200 100.00

Share Information


Notice of Meeting

Notice is hereby given that the Fifty Fourth Annual General Meeting of Lankem Ceylon PLC will be held at the Grand Oriental Hotel, No. 2, York Street, Colombo 01, on 30th September 2019 at 3.45 p.m. for the following purposes namely:

1 To receive and consider the Annual Report of the Board of Directors and the Statement of Accounts for the year ended 31st March 2019, with the Report of the Auditors thereon.

2 To re-elect as a Director, Mr. A.C.S. Jayaranjan who retires in accordance with Articles 84 and 85 of the Articles of Association.

3 To reappoint Mr. R. N. Bopearatchy who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a resolution which is set out below in relation to his reappointment (see Note No.4).

4 To reappoint Mr. R. Seevaratnam who is over seventy years of age as a Director. Special Notice has been received from a shareholder of the intention to pass a resolution which is set out below in relation to his reappointment (see Note No.5).

5 To reappoint Mr. A. Hettiarachchy who has attained the age of seventy years as a Director. Special Notice has been received from a shareholder of the intention to pass a resolution which is set out below in relation to his reappointment (see Note No.6).

6 To authorize the Directors to determine contributions to charities.

7 To reappoint as Auditors, Messrs KPMG Chartered Accountants and to authorize the Directors to determine their remuneration.

By Order of the Board,

Corporate Managers and Secretaries (Private) LimitedSecretaries

Colombo 28th August 2019

Note:1. Any member of the Company who is entitled to attend and vote

at this meeting may appoint a proxy to attend and vote instead of him or her. A proxy need not be a member of the Company.

2. A Form of Proxy for the Meeting is enclosed with this report.

3. The instrument appointing a proxy must reach the Registered Office of the Company’s Secretaries, Corporate Managers & Secretaries (Private) Limited, No. 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 01, not less than forty-eight (48) hours before the time appointed for the holding of the meeting.

4. Special Notice has been received by the Company from a shareholder giving notice of the intention to move the following Resolution as an Ordinary Resolution at the Annual General Meeting:

Resolved –

“That Mr. R. N. Bopearatchy who is seventy eight years of age be and is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.7 of 2007 shall not apply to the said Director, Mr. R. N. Bopearatchy”.


Resolved –

“That Mr. R. Seevaratnam who as at the date of the Annual general Meeting would have reached seventy six years of age be and is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Mr. R. Seevaratnam ”.


Resolved –

“That Mr. A. Hettiarachchy who has attained the age of seventy years be and is hereby reappointed a Director of the Company and it is further specially declared that the age limit of seventy years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Mr. A. Hettiarachchy”.


Notes



Notes


Form of Proxy

I/We.................................................................................................................. of ........................................................

........................................................................................... being a member/members of Lankem Ceylon PLC, hereby appoint

........................................................................... of ................................................................................. whom failing.

1. Sri Dhaman Rajendram Arudpragasam of Colombo or failing him,2. Ariyawansa Hettiarachchy of Colombo or failing him,3. Damitha Laksiri Vitharana of Colombo or failing him4. Anushman Rajaratnam of Colombo or failing him,5. Ranjit Noel Bopearatchy of Colombo or failing him,6. Kamalanesan Ponniah David of Colombo or failing him,7. Ruwan Tharka Weerasinghe of Colombo or failing him,8. Anthony Crossette Selvanayagam Jayaranjan of Colombo or failing him,9. Ranjeevan Seevaratnam of Colombo or failing him,10.Parakrama Maithri Asoka Sirimane of Colombo or failing him,11. Mahapelige Nishantha Kumara Jayamanne of Colombo

as my/our proxy to represent me/us and to speak and vote on my/our behalf at the Annual General Meeting of the Company to be held on 30th September 2019 and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid meeting.

For Against

1. To receive the Annual Report of the Board of Directors and the Statement of Accounts for the year ended 31st March 2019 with the Report of the Auditors thereon.

2. To re-elect Mr. A.C.S. Jayaranjan as a Director.

3. To re-appoint Mr. R. N. Bopearatchy as a Director.

4. To re-appoint Mr. R. Seevaratnam as a Director.

5. To re-appoint Mr. A. Hettiarachchy as a Director.

6. To authorize the Directors to determine contributions to charities.

7. To reappoint as Auditors, Messrs KPMG, Chartered Accountants, and to authorize the Directors to determine their remuneration.

The proxy may vote as he/she thinks fit on any resolution brought before the meeting.

As witness my hand/our hands this ………..………..……….. day of ………..………..……….. Two Thousand and Nineteen.

............................................Signature

Note:A proxy need not be a member of the Company. If no words are deleted or there is in the view of the proxy doubt (by reason of the manner in which the instructions contained in the Form of Proxy have been completed) as to the way in which the proxy should vote, the proxy may vote as he/she thinks fit.

Instructions as to completion are noted on the reverse hereof;


Instructions as to Completion1. Perfect the Form of Proxy, after filling in legibly your full name and

address by signing in the space provided and filling in the date of signature.

2. In the case of Corporate Members the Form of Proxy must be under the Common Seal of the Company or under the hand of an Authorized Officer or Attorney.

3. Where the Form of Proxy is signed under a Power of Attorney (POA) which has not been registered with the Company’s Secretaries, the original POA together with a photocopy of the same, or a copy certified by a Notary Public must be lodged with the Company’s Secretaries, along with the Form of Proxy.

4. The completed Form of Proxy should be deposited at the Registered Office of the Company’s Secretaries, Corporate Managers & Secretaries (Private) Limited., 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 01, not less than forty-eight (48) hours before the time appointed for the meeting.

Form of Proxy

Corporate InformationBoard of Directors

ChairmanS. D. R. Arudpragasam, FCMA (UK)

Deputy ChairmanA. Hettiarachchy, C.Eng, MIEE, MIProdE, MIChemE

Managing DirectorD. L. Vitharana, MNI (Lond.), MBA, M.Sc. (UK)

DirectorsR. N. Bopearatchy, B.Sc (Cey), Dip. BM, MBA (Univ. of Col.)Anushman Rajaratnam, B.Sc. (Hons.), CPA, MBA (Alternate, Mr. S. Rajaratnam)K. P. David, FCMA (UK), FCMA, FIPFM, CGMAR. T. Weerasinghe, BBA (USA)A. C. S Jayaranjan FCA, FCMA (UK), CGMAR. Seevaratnam, B.Sc. (Lond.), FCA (Eng.and Wales) FCA (ICASL)P. M. A. Sirimane, FCA, MBAM. N.K. Jayamanne, MBA(Col), BSc(Agric)Hons, CIM(UK), ACS (Aus)

SecretariesCorporate Managers & Secretaries (Private) Limited

BankersCommercial Bank of Ceylon PLC Bank of CeylonSampath Bank PLCPeople’s BankNational Development Bank PLC Hatton National Bank PLCPABC Bank PLCSeylan Bank PLCNations Trust Bank PLCUnion Bank of Colombo PLC

LawyersMessrs Julius & Creasy Attorneys-at-Law

AuditorsMessrs KPMG Chartered Accountants

Name of the Company Lankem Ceylon PLC

Legal FormA limited liability company incorporated and domiciled in Sri Lanka

Date of Incorporation 15th September 1964

Company Number PQ 128

Stock Exchange ListingThe ordinary shares of the Company are listed with the Colombo Stock Exchange of Sri Lanka

Registered OfficeNo. 98, Sri Sangaraja Mawatha, Colombo 10.

Principal Activities of the CompanyManufacturing and Distributing of Chemicals, Paints and Consumer Products

Rating OutlookCorporate Credit Rating of (SL) BB with Negative Outlook assigned by ICRA Lanka Ltd. in October 2018

Lankem Paints Ltd.Distribution of Paints

Lankem Consumer Products Ltd. Distribution of Consumer Products

Lankem Chemicals Ltd. Distribution of Industrial Chemicals

Lankem Agrochemicals Ltd. Distribution of Agrochemicals

SunAgro LifeScience Ltd.Import, Marketing and Distribution of Agrochemicals

Lankem Research Ltd. Research and Development

C.W. Mackie PLCManufacturer, Exporter, Importer and Distributor of Consumer, Hardware and Rubber Products

Lankem Plantation Services Ltd. Non-Operational

Sigiriya Village Hotels PLCOwning and Operation of Resort Hotel

Marawila Resorts PLCOwning and Operation of Resort Hotel

Colombo Fort Hotels Ltd. Investment in Hotel Companies

Lak Kraft (Private) Ltd.Managing of Boutique Hotel

Sherwood Holidays Ltd.Managing of Bungalows

Beruwala Resorts PLCOwning and Operation of Resort Hotel

Imperial Hotels Ltd.(formerly known as York Hotels (Kandy) Ltd.) Investment in Properties

B.O.T. Hotel Services (Pvt.) Ltd. Owning and Operation of Resort Hotel

Galle Fort Hotel (Pvt) Ltd.Owning and Operation of a Boutique Hotel

SunAgro Farms Ltd.Non-Operational

Associated Farms (Pvt) Ltd. Farming and Dairying

Lankem Technology Services Ltd.Provision of Information Technology and Allied Services

Nature’s Link Ltd.Manufacturing of Herbal/Natural based products

Lankem Exports (Pvt) Ltd. Export of Non Traditional Goods

SunAgro Foods Ltd.Growers, Importers, Exporters, Processors and Marketers of Food Items

Ceylon Tapes (Pvt) Ltd.Manufacturing & Trading of Packing Tape

J.F. Packaging Ltd.Manufacturing of Polymer Packing

Kiffs (Pvt) LtdManufacturing and Distribution of PET Bottles.

Alliance Five (Pvt) LtdBusiness of Injection Moulding

Associates

Consolidated Tea Plantations Ltd.(formerly known as Lankem Plantation Holdings Limited)

Waverly Power (Pvt) Ltd.

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